Americans are eating out more because of the strong economy. A stock market pullback might be enough to panic Wall Street, but not Main Street.
The carnage on Wall Street last week surely rattled investors, but on Main Street the good times aren’t about to end.
U.S. stocks SPX, +1.42% sank dramatically last week just days after spiraling to fresh all-time highs, raising questions about how much longer an economic expansion that’s more than nine years old can last. The Federal Reserve is raising interest rates, and whenever that happens, the economy always slows.
The economy doesn’t always slow right away, however, and interest rates are still so low that it’s likely to be awhile before they begin to hinder growth.
What’s more, the economy has plenty of momentum. Wages are going up, job openings are at a record high and the unemployment rate recently fell to a 48-year low of 3.7%. Americans are the most confident in the economy in two decades and they’ve got plenty of money to spend.
A good way to tell how Americans are feeling is to look at what they spend on restaurants.
“Those are wants and not needs,” noted senior economist Jennifer Lee at BMO Capital Markets.
Put another way, people dine out more when the economy is doing well and they’re not worried about losing their jobs. They eat more at home when times are tough and they’re counting pennies.
By that standard, the economy is doing great.
Spending at restaurants and bars has soared since the early spring, rising to the highest yearly pace in 25 years. Sales of food and drinks purchased outside the home leaped 10.1% in the 12 months from August 2017 to August 2018.
The latest figures on restaurant sales come out on Monday in the September retail sales report. Economists expect overall retail sales to increase close to 1% after hardly any gain in the prior month.
Now it wouldn’t come as a shock if spending at restaurants tapered off in September in light of recent streak of big gains. But the trend is clear: Up.
Retail sales is the headliner on the week’s economic calendar, but a smattering of other reports are likely to confirm that, yes, the economy is still humming even if Wall Street has lost the tune. These include U.S. job openings, industrial production and the level of inventories.
Even the plunge in stocks has to be taken in stride. After all, the Dow Jones Average DJIA, +1.15% hit a record high earlier in October.
It would have to fall a lot more for the panic to spread from Wall Street to Main Street.
“Nothing [in the economy] has changed at all,” Lee said.
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