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Restaurant Sales Expected to Rise this Year
WASHINGTON -- The restaurant industry, driven by an improving economy and elevated levels of pent-up demand, is projected to post its fifth consecutive year of real sales growth in 2014. However, consumers remain in a recession mindset, which continues to dampen overall growth, according to Bruce Grindy, chief economist for the National Restaurant Association.
This year, the restaurant industry is expected to register its fifth consecutive year of real sales growth, according to the NRA’s 2014 forecast.
Restaurant and food-service sales are projected to total $683.4 billion, up 3.6% from 2013, according to the forecast. In real terms, sales are projected to rise 1.2%, up slightly from a 1% gain in 2013.
Sales growth will be driven by an improving economy and elevated levels of pent-up demand among consumers, Grindy said. When asked in December 2013 if they were eating in restaurants as often as they would like, more than four in 10 consumers said no. In comparison, during the stronger restaurant business environment of the first decade of this century, only one-quarter of adults said they would like to be patronizing restaurants more frequently.
This measure of pent-up demand is elevated by historical standards and suggests that consumers’ appetite for restaurants remains largely unfulfilled, Grindy suggested. However, as much as they would like to spend more, consumers continue to hold back because they remain stuck in a recession mindset.
In a December survey sponsored by the NRA, three of four adults said they were concerned about the economy and had cut back either “significantly” or “somewhat” on spending. Only one consumer in four said he was confident in his financial situation and had not cut back on spending. Among consumers who described their personal finances as either “fair” or “poor,” nearly nine in 10 said they had cut back on spending.
Consumers remain stuck in this perception despite the fact that the economy has added nearly seven million jobs since the depths of the Great Recession. This sentiment also explains why restaurant sales growth remains below what would be expected during a normal recovery. Coming out of the previous four recessions, restaurants registered at least three consecutive years of real sales growth above 2%. In the four years that followed the Great Recession, real sales growth topped out at 1.7%.
Job growth has always been a key driver of restaurant sales, and this will be the case this year more than any time in recent memory, Grindy forecast. The association expects monthly job gains to average more than 200,000 over an entire year for the first time since 2005 -- a consistent stream of positive numbers that should help bolster consumers’ confidence.
Published by The Business Journal, Youngstown, Ohio.
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