Published on Tuesday, 20 January 2015
Written by Jerry Stiegler
Retail sales weakened in December but restaurants showed a nice sales increase. Technomic reports diner traffic is up. Restaurant “real” sales should have been up last year. Various studies show confidence in the U.S. is improving.
U.S. retail sales fell in December from November by 0.9 percent on a seasonally adjusted basis according to advance numbers from the U.S. Census Bureau. Excluding motor vehicles and parts, sales declined by 1 percent. For the year, total retail sales are up 4 percent.
The Bureau revised the November (vs. October) sales growth down sharply from 0.7 percent to 0.4 percent.
Restaurant and bar sales outperformed the total market last month by rising 0.8 percent over November. Restaurant and drinking place sales were up 8.2 percent over December 2013. For the year, the Bureau estimates that restaurant and bar sales were up 5.8 percent.
However, sales for November were revised down from 0.7 percent to 0.3 percent.
Thus, the government numbers, which can vary significantly from month to month, show there is at least some modest growth in the industry.
As we remind readers every month, there are some limitations and cautions with the Census Bureau’s figures. First, the numbers are considered to be “advance” in that they are based on a small preliminary sample and thus are subject to revision. Second, the report covers only restaurants and bars. Not included are hotels, motels, resorts, clubs or any of the so-called institutional segments such as schools, colleges, employee feeding and healthcare. Finally, some of the numbers are seasonally adjusted for such factors as holidays, weekends, etc. but not for inflation. (The 12-month figures are unadjusted.)
Economic News This Week
- Initial jobless claims jumped by 19,000 to 316,000 in the week ending January 10. The 4-week moving average rose 6,750 to 298,000. The report from the Department of Labor said there were no special factors influencing this week’s data but it seems in the past January’s seasonal layoffs sometimes effected the numbers.
- The Producer Price Index dropped 0.3 percent in December with final demand goods declining by 1.2 percent while final demand services increasing by 0.2 percent. Food prices declined by 0.4 percent and energy prices plummeted 6.6 percent. In the last 12 months the PPI is up a modest 1.1 percent.
- The Consumer Price Index fell 0.4 percent in December, pulled down in large part by a 9.4 percent drop in gasoline prices according to the Bureau of Labor Statistics. In contrast, food prices increased by 0.3 percent. For all of 2014, consumer prices rose just 0.8 percent. Food prices are up 3.4 percent for the year.
- The Federal Reserve Bank of NY’s Empire State Manufacturing Survey rose to 10.0 in January after falling into negative territory in December. New orders, shipments and employment showed gains for the month.
- The Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey fell steeply by 18 points in January after turning in an excellent performance of 24.3 in December. But, the index still showed expansion in manufacturing in the Philadelphia Fed’s region at 6.3. New orders also declined but stayed in positive territory at 8.5. (Any reading over zero shows expansion.) Shipments took a hit falling 22 points to minus 6.9. The employment index also fell into negative territory dropping 10 points to minus 2.
- December industrial production fell 0.1 percent, dragged down by a 7.3 percent decline of utilities output due to unexpectedly warm weather. Manufacturing production rose 0.3 percent for the month. The Federal Reserve also announced that Capacity Utilization fell by 0.3 percent in December to 79.7 percent. The Fed estimates that Capacity Utilization has risen 3.2 percent since December 2013. Economists look at capacity utilization as an important factor in the economy. The higher capacity utilization runs the more economical it is to produce goods and the more willing businesses are to hire.
- Gallup’s US Economic Confidence Index stayed in positive territory for the third week in a row. The Index was 4.0 for the week ending January 11. This is the highest the Index has been since Gallup began the study in 2008. The finding is that 4 percent more Americans believe the economy is excellent or good than believe it is poor.
- American’s satisfaction with their personal lives rose to 85 percent, which matches its prerecession reading and is in the range of where it’s been for most of 15 years. American’s satisfaction with the direction the U.S. is going in January rose to 32 percent, which is far below satisfaction levels a dozen year or so ago but is still the highest it has been in 8 years according to the Gallup Poll.
- The Small Business Confidence Index jumped 2.3 points in December, breaking through the 100 level to 100.4. Out of 10 components in the Index, 7 were up. The National Federation of Independent Businesses noted this was the best reading since October 2006.
- The University Of Michigan Consumer Sentiment Index jumped to the highest level in 11 years, with the preliminary January Index hitting 98.2, up from 93.6 in December. The Current Conditions Index increased to 108.3, the highest reading since January 2007. The Expectations Index increased to 91.6 from 86.4 in December.
Foodservice News This Week
- Dinner traffic is up, according Technomic. A Technomic study of dinner and late night dining trends found that 64 percent of consumers eat dinner away from home at least once a week vs. 52 percent of those who did in 2011.
- Prices for food away from home increased 0.3 percent in December and were up a total of 3 percent for 2014. Food at grocery stores increased 0.3 percent in December and rose 3.7 percent for the year. In theory, this should provide a competitive advantage to the foodservice industry. It also provides a benchmark for calculating real growth. The Commerce Department says that restaurants and bars experienced a 5.8 percent sales increase in 2014. Assuming we can use data from the two studies, real sales (sales adjusted for menu price inflation) for restaurants and bars were up 2.8 percent.
- A made to order bakery will be open in New York by Dominique Ansel, inventor of the Cronut. All items will be made in front of the customer.
- Hardee’s will begin installing self-order Kiosks that will enable customers to place, customize and pay for orders. The equipment will also allow management to pull activity reports and manage personnel.
- OrderUP Food Delivery System has entered the Raleigh, N.C., market offering delivery from more than 30 restaurants and serving the down area and NC State University.
- Corporate Stirring: YUM! Brands new CEO Greg Creed has stated flatly that the chain is not leaving Louisville. Creed, who succeeded David Novak, recently dismissed persistent rumors of company relocation as “nuts.” Starbuck’s has announced the layoff of a “small number” of employees at their corporate headquarters. The company stressed there a no layoffs at store level.
- Milano Restaurants International has received financing from GE Capital’s Franchise Finance primarily to develop Milano’s fast-casual pizza concept Blast 825. The restaurant features made to order pizza that is fast baked at 825 degrees. There are currently 4 Blast 825 pizza locations open with 2 more in development.
- Growth Chains: Dunkin’ Brands announced the company opened 422 new locations for Dunkin’ Donuts and Baskin Robbins in 2014. Burger 21 has 15 restaurants now open and has more than 21 franchised restaurants in development. Tropical Smoothie Café opened their 400th location in 2014 and plans to have a total of 800 units by 2018. Mod Pizza, currently with 31 stores, plans on opening 50 more this year. First Watch Restaurants will open 15 locations in the Dallas-Ft. Worth area. Taco Bell will open 1,300 restaurants worldwide by 2013. BURGERFi opened 31 new locations in 2014 and is projecting they will open 50 to 60 new units this year.
- Comparable Store Sales Reports: Chuy’s (up 3.8 percent), Diversified Restaurant Holdings (up 5.8 percent), Kona Grill (up 3.1 percent), Popeye’s (domestic up 10.7 percent, company-owned up 6.9 percent, franchised up 10.8 percent), and Tropical Smoothie Café (up 11.4 percent).
For details and same-store sales of other chains, please click here for the Green Sheet.