US May restaurant sales reached $46.5 billion, about $200 million down from March, which posted a record volume. However, in spite of the recent decline, Bruce Grindy, Chief Economist at the National Restaurant Association (NRA), said growth should be strong in the second half of 2014.
After adjusting for seasonal holiday and trading-day factors, sales at eating and drinking places increased by 4.1% in May 2014 compared to May 2013. Overall retail sales climbed by 4.3% over the same period, while grocery store sales rose by just 1.3%.
Car sales ate into May restaurant sales
Mr. Grindy believes that the recent decline in restaurant revenue could be partly due to a steep rise in car sales. Auto dealers reported a 1.4% increase in sales in May compared to March, and 10% above the May 2013 level. May auto sales hit a 9-year high.
Looking ahead, restaurateurs are generally optimistic that their incomes will improve during the coming months.
According to the NRA’s May 2014 Tracking Survey, forty-six percent of restaurant operators believe that during the next six months their sales will be higher than during the same period last year, while just 11% expect them to fall.
On the macro level, the NRA forecasts a continued improvement in business conditions for restaurants during the second half of 2014, as employment growth raises income and employees’ confidence in their financial situation. “This will set the stage for households to burn off more of their accumulated pent-up demand for restaurants,” the NRA wrote.
In April 2014, job vacancies in the hospitality sector reached a post-recession high, with the number of job openings topping 600,000.
Restaurant owners are voicing concern about labor availability, suggesting that the industry’s labor challenges are set to return. In April there were more than 100,000 job openings compared to February.
The job openings rate in the restaurants-and-accommodations sector stood at 4.8% in April, a 4% increase on February and the highest level since September 2007. This compares to a job openings rate in the overall economy of 3.1%.
Higher food costs worry restaurateurs
Restaurant owners’ top concern today is the price of food, with 22% of operators commenting that high food costs were their “top challenge” last month.
The percentage of restaurateurs reporting labor availability as their number-one problem is still way below 2006-2007 levels.
(Source: National Restaurant Association)
Video – Restaurant Industry Update – May 2014
Hudson Riehle, from the National Restaurant Association, provides an update on the latest Restaurant Performance Index as well as some other economic indicators.