U.S. retail sales declined in January while restaurant sales were flat. Rising government price indexes raise fears of higher inflation and interest rates. Technomic reports sales growth among the 500 largest restaurant chains slowed for the second consecutive year. The number of restaurants in the U.S. declined last year. These stories and whole lot more This Week in Foodservice.
The U.S. Census Bureau’s advance monthly sales report for January showed a decline of 0.3 percent from December 2017. In contrast, the report showed an increase of 3.6 percent compared to January 2017. The Bureau also revised total retail sales for December down from +0.4 percent to flat. For the 12 months ending in January this year, total retail sales have increased 5.1 percent.
Restaurant and drinking place sales were unchanged in January from December but increased 2.1 percent compared to January of 2017. The advance sales number of 0.7 percent for restaurants and bars for December was revised up to +0.9. In the last 12 months, ending in January this year, restaurants and drinking places sales rose 1.8 percent.
While no one will find a month with no growth from the previous month a cause for joy, it is not a cause for panic either. Looking at all the Census Bureau numbers shows restaurants are enjoying some growth.
There are some limitations and cautions about this data. The numbers are described as “advance” since they are based on a limited sample and as such can be, and frequently is, revised. The sales data is for restaurants and bars only. The Census Bureau does not survey hotels, resorts, clubs, employee feeding, healthcare, schools and colleges, and military feeding. Some sales statistics are adjusted for calendar changes, holidays, weekends but not for menu price changes.
Economic News This Week
- The January Producer Price Index for final demand increased 0.4 percent. Final demand for goods increased 0.9 percent and final demand services grew by 0.4 percent. The increase in final demand goods was heavily influenced by a 3.8 percent increase in energy prices. The Bureau of Labor Statistics pointed out that for the 12 months ending in January, prices for final demand less foods, energy and trade services moved up 2.5 percent, the largest rise since 12-month percent change data were available in August 2014.
- The Consumer Price Index increased 0.5 percent in January on a seasonally adjusted basis. The CPI has only risen 0.5 percent twice since January of 2017 and the average is +2.1 percent over the last 12 months. The Bureau of Labor Statistics categorized the January increase as broad-based and gave the “Core” index – all items excluding food and energy – at +1.8 percent. The CPI draws more attention now due to concern that inflation is rearing its ugly head. Some observers blamed the recent volatility in the stock market on fear of inflation. Investors are concerned that an increase in inflation will encourage the Federal Reserve to more aggressively increase interest rates.
- Initial-jobless claims totaled 230,000, an increase of 7,000 for the week ending Feb. 10. The 4-week moving average was 228,500, an increase of 3,500.
- Industrial production fell 0.1 percent in January following 4 consecutive months of increases. The manufacturing sector output was unchanged from December. Mining output fell 1.0 percent while the index for utilities rose 0.6 percent. Capacity Utilization for the industrial sector fell 0.2 percentage points to 77.5 percent, a rate that is 2.3 percentage points below its long-run (1972-2017) average.
- The Empire State Manufacturing Index showed continuing growth in Februarybut at a slower pace. The Index fell 4.6 points from January to a level of 13.1. (Any number greater than zero shows expanding activity.) The New Orders Index rose 1.6 points to a final level of 13.5. The Shipments Index declined 1.9 points to a final level of 12.5. The Unfilled Orders Index edged up 0.6 percentage point to a final level of 4.9. The Number of Employees Index jumped 7.1 points to a final level of 10.9 while the Average Employee Workweek Index rose 3.8 points to a final level of 4.6.
- The Philadelphia Federal Reserve Manufacturing Business Outlook Survey shows continuing expansion in the Philadelphia region. The overall index rose to 25.8 in February from 22.2 in January. (Any reading greater than zero shows expansion.) The New Orders Index shot up from 10.1 in January to 24.5 in February but the Shipments Index fell from 30.3 in January to 15.5 in February. The Unfilled Orders Index rose from minus 1.8 in January to 14.5 in February. The Number of Employees Index increased to 25.2 in February from 16.8 in January but the Average Employee Work Week Index dropped from 16.7 to a final level of 13.7.
- January privately owned housing starts increased 9.7 percent from December and increased 7.3 percent from January 2017. Single-family housing starts rose 3.7 percent from December. The number of Building Permits Issued in January were up 7.4 percent from December and also up 7.4 percent from January 2017. Single family building permits fell 1.7 percent from December.
- The preliminary report of The University of Michigan’s February Index of Consumer Sentiment hit its second highest level since 2004, rising to 99.9 from 95.7 in January. The Current Economic Conditions Index rose to 115.1 from 110.5 last month. The Index of Consumer Expectations increased from 86.3 in January to 90.2. The confidence shown in the index is at least mildly surprising given the recent stock market gyrations.
Foodservice News This Week
- According to the Consumer Price Index, food prices increased 0.2 percent in January. As has been the pattern for several years, the prices for food at home increased at a slower rate than prices for food away from home. Food at home prices increased 0.1 percent while food away from home prices increased 0.4 percent. In the last 12 months, food at home prices rose 1.0 percent as opposed to an increase of 2.5 percent for food away from home.
- Technomic reports sales among the top 500 restaurant chains grew for the second consecutive year. The soon-to-be-issued study says in 2017 sales among the top chains rose 3.2 percent, slightly less than 3.8 percent in 2016. Technomic attributes the slowing growth to competition from retailers and “other meal options.”
- The number of restaurants in the U.S. declined last year. The NPD Group’s ReCount study put the 2017 restaurant count at 647,288, a decline of 2.0 percent from 2016. The drop was primarily due to a 3 percent decline in independent operations. The number of chain restaurants rose to 301,183, an increase of 982 units. The quick-service restaurant count declined to 353,121 units, a 1.0 percent dip from 2016. Fast-casual restaurant units rose 4.0 percent to a total of 25,118 locations. Full-service restaurants, which include casual dining, family dining and fine dining operations, fell 2.0 percent to a total of 294,167 locations.
- C-store chain QuikTrip is testing delivery service with Uber Eats. The test focuses on four stores in Tulsa, Okla.
- Corporate Stirrings: Panda Restaurant Group, owners of Panda Express, plans to franchise Raising Cane’s Chicken Finger’s in Alaska and Hawaii. Jollibee Foods Corporation, operator of more than 3,700 restaurants in Asia and the Middle East, increased its ownership in Smashburger to 85 percent at a cost of $100 million U.S. Is Bojangles a takeover target? The CL King investment group believes Bojangles could be a good acquisition for someone because of the chicken and biscuit chain’s recent under performance. Further, King thinks that the Inspire Restaurant Group (Arby’s, Buffalo Wild Wings) would be a perfect match. The Inspire Group’s majority owner is the Roark Group.
- Growth Chains: McDonald’s and Burger King are both targeting Japan for growth with McD’s planning on opening an additional 200 locations in the next 3 years while BK plans to triple their current restaurant to 300 by 2022. Uber Burrito has signed a master franchise agreement that will add 100 units in Texas in Houston, Austin and San Antonio. Dickey’s Barbecue Pit will open 2 restaurants in Muskegon, Mich. Shake Shack plans on opening 35 locations this year and will have 200 U.S. and international units by 2020.
- Comparable Store Sales Reports: Burger King up 5.1 percent, Popeye’s Louisiana Kitchen down 2.5 percent, and Tim Hortons up 0.1 percent.
For details and same-store sales on other chains, please click here for the Green Sheet.