Recent economic indicators give a mixed picture of how robustly the U.S. is recovering from the Great Recession, leading forecasters to predict muted growth in the restaurant industry during next two years, with the fast-casual segment most likely to lead the way.
The U.S. Department of Commerce released a revised estimate of the nation’s first-quarter gross domestic product Wednesday, reporting a growth rate of only 1.8 percent, compared with an earlier estimate of 2.4 percent. The news followed a report from Tuesday that found new-home sales rose 2.1 percent in May, its highest level since July 2008, implying some welcome strengthening of the housing sector.
That same day, the Conference Board released its Consumer Confidence Index, revealing that the index rose more than 7 points to a score of 81.4 in June, its highest level since January 2008. While that score is markedly higher than 58.4 in January 2013, it still is well below pre-recession levels.
Despite the unclear picture of the economy, Chicago-based market research firm Technomic Inc. is projecting modest sales growth in the restaurant industry for 2013 and 2014, which would trail more robust numbers from 2012, president Ron Paul said.
“Of all the retail segments, there’s no substitute for a meal prepared away from home, so our continued outlook for the industry is still very healthy,” he said. “We’ll shift between brands, but overall, the dollars going to away-from-home eating I can only see increasing.”
At its Restaurants 2013 Trends and Directions conference last week, Technomic forecast that sales in 2013 for limited-service restaurants — which the firm said includes quick-service and fast-casual brands — would rise 4 percent, or 1 percent in inflation-adjusted “real” terms. The firm’s early assessment of 2014 sales calls for a 4-percent nominal gain and a 1.5-percent real gain for limited-service restaurants.
Technomic also forecast that sales at full-service restaurants are not expected to grow meaningfully this year or next year.
In 2012, sales grew 13.2 percent for fast-casual restaurants, 4.6 percent for quick-service brands and 3.6 percent for casual-dining chains.
Paul predicted that the fast-casual segment would remain the key driver of restaurant sales growth over the next few years. He based that notion on consumers in all socioeconomic groups facing different financial challenges and either trading down from casual dining or up from quick service.
“The ‘fast’ is faster than casual dining, and the ‘casual’ means better food quality,” Paul said. “It isn’t just the price that’s different, it’s also the perception of better-quality food, in a different service style with no tipping.”