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Restaurant Slump May Signal Economic Slowdown

Source: ahmad nawawi via flickr

Economists theorize that we’ve been out of the recession since June 2009.  The recovery has been a slow one at best.  If the recent news from the restaurant world is any signal, we might be in for an even slower recovery.

Restaurant stocks are underperforming the U.S. market, a signal that shares of retail companies also may be poised to lag behind.

Income growth, one of the primary drivers of discretionary spending, remains lackluster, as does the labor market, said Tom Porcelli, chief U.S. economist at RBC Capital Markets Corp. in New York. Even with unemployment falling below 9 percent in November for the first time since March, consumers still “lack the ammunition to drive spending at this point,” he said.

So – you say – “who cares about restaurant stocks?

With both income growth and confidence weak, restaurants are a “canary in the coal mine,” because dining out is “one of the first things households cut during tough times,” said David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates Inc. in Toronto.

 

U.S. Consumer Stocks May Lag – Bloomberg.

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