Restaurant Finance Monitor
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We have long held that coverage of the restaurant industry provides a better view into economic trends than the hundreds of PHD economists at the FED can discern. As we’ve reported, a necessary $5.00 price point for lunch and $8 or $9 at dinner does not bode well for the necessary consumer spending to support the general economy.

Here’s some meat on the bone: The distinguished economist and market strategist, David Rosenberg, published today his takeaways from the September Fed Beige Book, which talks about retail indications within the various Federal Reserve Districts. Since 70% of the US economy is dependent on consumer spending, the following direct quotes from the regions are noteworthy:

Overall, from David Rosenberg: “…the vast majority of Fed District Banks noted uncharacteristic weakness of late with retailers cutting their outlooks and inventories.. two really soft areas of retailing seem to be centered in tourism and the restaurant business.”

From Boston: “Retail results were mixed, while restaurants and tourism contacts cited recent signs of softening.”

From New York: “retail sales have softened in recent weeks and were mostly little changed from a year earlier…. a major retail chain noted that sales were…below plan in September…reflecting weak demand for home goods.”

From Philadelphia: “Sales of new autos and of existing homes continued to decline”.

From Cleveland: “Retailers’ reports on consumer spending were mixed…. contacts in the restaurant industry reported that sales were down in this period because of increased competition from new restaurants…. homebuilders reported softening demand, which may suggest that households are uncertain about the medium-run economic outlook”.

From Richmond: “Retail sales rose moderately, overall, but some retailers expressed concerns that economic uncertainty could hamper fourth quarter sales….on balance, retail sales rose moderately in recent weeks…..several retailers said they planned to reduce inventories and scale back capital spending over concerns that economic uncertainty could limit consumer spending in the 4th quarter.”

From Atlanta: “retail sales remained unchanged since the previous report…. consumer spending increased slightly on balance…. non-auto retail sales moved up a bit, with reports of gains in appliances, outdoor, and lawn and garden, declines in apparel. Contacts expected holiday spending to be similar to or slightly higher than last year.”

From St. Louis: “…multiple industries noted a heightened sense of economic uncertainty.”

From Minneapolis: “Consumer spending was mixed since the last report.”

From Kansas City: “Retail sales rose modestly since the previous survey report…expectations for sales to rise in the next few months but at a slower pace. Lower priced items continued to sell well, while sales of higher priced items lagged…restaurant contacts reported a strong decline in sales in late August and September..”

From Dallas: No retail discussion but “several manufacturing contacts pointed to increased uncertainty stemming from tariffs and trade tensions, the political climate, and the global economy.”

From San Francisco: “Sales of retail goods increased modestly.”


Don’t believe everything you hear or read, especially when presented by governmental officials (i.e. Larry Kudlow, Peter Navarro, Steve Mnuchin, Wilbur Ross, All the numbers they quote are lagging economic indicators, most of which looked fine in 1987, 1994, 2001 and 2007. The good news, however, is that the Fed is stepping up again to keep it all going, if they can. If I were running a restaurant business, and I am on the Board of a couple, I would be staying very liquid and financially flexible.

Roger Lipton