The Census Bureau reported total U.S. retail sales crept up 0.2 percent in January from December. The forecast called for sales to be flat for the month. Compared to January of 2018, sales rose 2.3 percent. The bad news was that December sales were revised down to minus 1.6 percent vs. the advance report of minus 1.2 percent.
Restaurants and drinking places outperformed the total retail market rising 0.7 percent in January compared to December. Restaurants and bars sales were up 5.4 percent over January of last year. And, restaurants and drinking places’ advance sales for December were revised upward from minus 0.7 percent to +0.1 percent.
Certainly this wasn’t a stellar month for the restaurant industry, but slight growth beats being down. This report comes with limitations and cautions. The advance data is based on a small sample subject to revision
The research is conducted only with restaurants and drinking places; it excludes 30 percent to 40 percent of the foodservice industry including hotels, resorts, employee feeding, schools, colleges, healthcare and military.
Some of the statistics are adjusted for seasonal variations, holidays and weekends but none of the data is adjusted for menu price changes.
Economic News This Week
- Initial-jobless claims totaled 223,000, a decline of 3,000 for the week ending March 2. The 4-week moving average fell by 3,000 to a final level of 226,500. It would appear more and more likely the big runup in claims a month or so ago was a one-time glitch.
- National employment grew by 180,000 jobs in February, according to ADP. Slightly more than half of the new jobs (95,000) were at midsized employers while 77,000 were hired at large employers.
- Hiring growth slowed significantly in February, per the U.S. Bureau of Labor Statistics, with employers adding just 20,000 jobs. This is far below the forecast of 180,000 and the lowest monthly increase since September 2017. Some economists stated there was no cause for panic. The miniscule growth could be in part weather related, according to some economists. Employers’ inability to find workers could be a cause as well.
- The disappointing new jobs report carried one bit of good news in the form of rising wages. The theory is a tight job market results in higher wages and the February Bureau of Labor Statistics study reported wages were up 3.4 percent compared to February 2018.
- Growth slowed in February for the Institute for Supply Management’s Production Manufacturing Index. The Index dropped to 54.2 from 56.6 in January. Any reading greater than 50 indicates expansion. The Production Index totaled 54.8, a decline of 5.7 percent. The New Orders Index fell by 2.7 percentage points to a level of 55.5. The Employment Index fell by 3.2 percentage points to a level of 52.3. The Order Backlog Index, however, rose 2.0 percentage points to a final level of 52.3. This marks the 118th consecutive month that manufacturing activity grew, per ISM. Of the 18 manufacturing industries studied, 16 reported growth.
- The Institute for Supply Management’s Non-Manufacturing Index showed increased growth in February. The Index rose by 3.0 percentage points for a reading of 59.7. Any number exceeding 50 indicates increased activity. The Business Activity Index totaled 64.7, an increase of 5.0 points. The New Orders Index hit 65.2, an increase of 7.5 points. The Order Backlog Index was up 3.0 points for a reading of 55.5. The Employment Index dropped by 2.6 points but stayed in the growth range at 55.2. All 18 of the non-manufacturing industries surveyed, including Accommodation & Foodservice, reported growing in February.
- Total U.S. construction spending declined 0.6 percent in December compared to November. Total December construction spending, though, was up 1.6 percent compared to the same month in 2017. Private construction spending was down 0.6 percent as well for the month. December residential construction spending was 1.4 percent less than November.
- Sales of new single family homes in December were at a seasonally adjusted annual rate of 621,000. This represents a 3.7 percent increase from November sales but down 2.4 percent from December 2017. In 2018 622,000 new homes were sold, which is a 1.5 percent increase compared to 2017.
- Privately owned housing starts rose 18.6 percent in January compared to December but were down 7.8 percent from January 2018. Single-family housing starts were up 25.1 percent in January from December.
- January building permits for privately owned housing increased 1.4 percent compared to December but were down 1.5 percent from January 2018. The number of permits issued for single family homes fell 2.1 percent in January from December.
- The U.S. Federal Reserve reported consumers increased their borrowing by 5.1 percent in January. Revolving credit, which is mostly credit card debt, increased by 2.9 percent. Nonrevolving credit (auto loans, student loans, etc.) increased by 5.9 percent.
- The Bureau of Labor Statistics calculated non-farm business productivity rose 1.9 percent in the fourth quarter of 2018. Output increased 3.1 percent and hours worked increased 1.2 percent. Unit labor costs increased 2.0 percent in the fourth quarter and 1.0 percent in the last four quarters. Productivity is considered an import factor in the activity since it allows workers to be paid more without raising inflation worries and can make companies more profitable without increasing prices.
Foodservice News This Week
- Foodservice hired minimally in February with the government reporting the industry added just 1,600 new employees during the month. Labor experts advise not to worry because it’s just one month and other factors of the economy remain strong.
- 7-Eleven plans to open six test stores across the U.S. to try out new concepts. One test involves a Laredo Taco Company restaurant. (7-Eleven owns Laredo Taco.) Also under test is a cafe serving coffee drinks and made-to-order smoothies and shakes. Another test includes wine and craft beer on tap for on-premise consumption or to go.
- Red Robin Gourmet Burgers will offer Donatos Pizza in its restaurants. Columbus, Ohio-based Donatos will sell its pizza in 24 Red Robin locations.
- Famous Dave’s financials improved during the company’s last quarter. The chain attributes, in part, its higher sales to newly renovated restaurants. The company encourages franchisees to invest $100,000 to $300,000 to update their restaurants, claiming the operators could recover the expense within two years.
- Corporate Stirrings: Papa John’s International has reached an agreement with John Schnatter, the firm’s founder and former chairman, to resign his seat on the chain’s board of directors. The agreement calls for the replacement to be acceptable to both Schnatter and Starboard Value LP. Starboard Value recently purchased 10 percent of Papa John’s. Schnatter reportedly still owns approximately 30 percent of the pizza chain. The sale of P.F. Chang’s to Paulson & Company and TriArtisan Capital is now official. The former owner was Centerbridge Partners. Terms were not disclosed but it had been reported the price was in the $700 million range. Casey’s General Stores Inc. acquired the Fantasy’s Convenience Stores and Ride The Wave car washes. All are in the Omaha metro area. Casey’s plans an extensive remodel for the stores so all locations can offer pizza, donuts, made-to-order sandwiches and other freshly made food items. Price of the deal was not given.
- Comparable Store Sales Report: Bad Daddy Hamburgers up 0.2 percent Baskin Robbins down 3.7 percent, CEC Entertainment up 3.3 percent, Chuy’s Holdings up 0.9 percent, Diversified Restaurant Holdings up 2.2 percent, El Pollo Loco (System up 4.4 percent, company owned up 3.7 percent and franchised up 5.1 percent), Famous Dave’s (Company owned up 2.2 percent and franchised down 1.5 percent), Good Times Burgers down 5.2 percent, Habit Burger up 2.4 percent, Rave Restaurant Group (Five Pie Pizza down 3.6 and Pizza Inn up 2.7 percent) and Shake Shack up 2.3 percent.
For details and same store sales of other chains, please click here for the latest Green Sheet.