The Restaurant Industry’s Recovery Could Take Longer Than Expected

In a sign that the restaurant industry’s recovery will be even more drawn out, last month sales inched up at the slowest pace since the economy began to reopen from the lockdowns. 

Overall, eating and drinking places registered sales of $55.6 billion on a seasonally-adjusted basis in September, according to preliminary data from the US Census Bureau. Those sales figures were up 2.1% from August’s seasonally-adjusted volume of $54.5 billion. 

This would be a substantial increase in regular times, but it was approximately half of the gains registered in July and August—in both dollar volume and percentage terms. Overall, eating and drinking place sales in September were 15% below, or nearly $10 billion, their pre-coronavirus levels in January and February.

In August, the restaurant industry posted a 4.3% increase in eating and drinking, which represented the most robust growth among the major categories tracked by the Census Bureau. 

Overall retail sales rose 1.9% in September, which was their strongest increase in total sales since June. For the restaurant industry, though, this might be an ominous development, as the National Restaurant Association suggests that many consumers may have shifted their spending from restaurants to other categories in September. 

In fact, clothing stores (11%), department stores (9.7%), sporting goods, hobby and book stores (+5.7%) and motor vehicle dealers (4.0%) all posted stronger gains than the 2.1% increase at eating and drinking places was well below the sales gains.

Recent figures released by the Commerce Department reaffirm that the US retail market is continuing down the path of recovery. US retail sales increased by 1.9% or $549.26 billion in September—surpassing economists’ expectations of a .7% increase for the month. Year-over-year, retail sales have increased by 5.9%. 

But there are still questions about whether this resurgence is sustainable. “Today’s data indicate that consumers are still driving the recovery forward—but there is growing doubt that the pace of activity can be sustained as income growth moderates and savings are being drawn down,” James Watson, senior US economist at Oxford Economics, said in a report by S&P Market Intelligence. 

The COVID-19 pandemic slammed eating and drinking places as sales plummeted nearly $162 billion from expected levels, based on the unadjusted data. With the reduction in spending at non-restaurant foodservice operations in the lodging, arts/entertainment/recreation, education, healthcare and retail sectors, and the total shortfall in restaurant and foodservice sales likely surpassed $200 billion during the last seven months.

Earlier this year, the National Restaurant Association recently predicted that at least 100,000 restaurants would close this year because of the pandemic.