What is in this article?:
- Technomic: Mixed economic view could dampen spending
- Who's hurting most?
- Effects on the industry
Research firm Technomic is projecting modest sales growth in the restaurant industry for 2013 and 2014.
Who's hurting most?
Fast-casual brands’ supposed sweet spot of service and price points would likely appeal to many people who “are tired of cutting back,” Paul said.
However, recent contradictory economic indicators and uncertainty in the policy arena might still force some consumers to pull back their spending at some point, said Dr. Arjun Chakravarti, who gave the keynote economic forecast at Technomic’s Trends and Directions event.
The picture is more nuanced for middle-class households, said Chakravarti, professor at the Illinois Institute of Technology’s Stuart School of Business. Their job growth is stabilizing slowly and home values are starting to pick back up, but younger consumers in the middle class may be missing out.
“While most middle-class consumers have much better job stability, they do seem to be spending, and those with homes are getting value back in their net worth,” he said. “But some can’t get into the housing market because of student loans and other non-revolving debt, and can’t buy into higher-end purchases.”
There is some possibility for those young consumers splurging on the “affordable luxuries” that Technomic’s Paul said abound in the fast-casual segment or individual chains like Starbucks, according to Chakravarti. But that group is trending toward the frugality of its grandparents’ generation, he added.
Older Americans tend to be represented more in the nation’s wealthier households, who have enjoyed historically low borrowing rates and a nice run in the stock market the past few years — though stocks may be going through a correction, Chakravarti noted.
“If you’re on the wealthy side, it’s tricky,” he said. “If stocks dip a bit and they pull back, those people will put a little more allocation toward savings than they did before.” However, a resurgence in business activity could be behind the improving performance of higher-end restaurants, “like the Capital Grilles of the world,” he added.
Low-income consumers, who tend to have the least amount of education and thus the highest levels of unemployment, are struggling mightily on most economic measures, he said. As with middle-class consumers, the combination of higher payroll taxes and higher gas prices in 2013 severely cut into poorer American’s spending power. But those consumers have it even harder because their employment generally comes from manufacturing and the retail and service industries, which depend on consumer spending.