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When the economy slumps and teeters on the brink of a recession, one of the first things Americans do is cancel dinner reservations. But consumers aren’t doing that right now.
Sales at bars and restaurants jumped 7.2% in January to mark the biggest increase in 22 months. Receipts were also up 25% in the past year — about four times the rate of inflation in the same span.
Demand remained quite high, according to OpenTable, a dinner-reservation technology company under Booking Holdings, Inc.
BKNG,
umbrella.
The increase in restaurant sales came after a pair of small declines in the final two months of 2022, suggesting the U.S. economy may still be growing at a solid pace despite rising interest rates orchestrated by the Federal Reserve to tame high inflation.
Part of the recent surge could be attributed to Americans’ desire to get out more after being cooped up during the COVID-19 pandemic. Eventually, this pent-up demand will be sated, economists say. Oxford Economics called a big 3% increase in overall retail sales in January a “short-lived pop.”
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Entering the new year, most Wall Street
DJIA,
economists predicted a sharp slowdown in the U.S. economy. They cited higher borrowing costs, which tend to depress consumer spending, the main engine of growth.
“We continue to expect a recession later this year,” Oxford Economics lead U.S. economist Oren Klachkin said in a note to clients.
Other economists contended the surprisingly sharp increase in retail sales in January was exaggerated by the government’s formula for adjusting the numbers for seasonal swings. That has happened a lot since the pandemic.
“The data point to solid, but not surging, goods demand,” Bank of America said.
Still, the strong desire of Americans to dine out or order takeout suggested the economy has some staying power.
What’s fueling the increase in spending?
Most Americans who want a job can find one, for one thing. The nation’s unemployment rate fell last month to a 54-year low of 3.4%, reflecting a tight labor market in which wages are rising at the fastest pace in decades.
At the same time, inflation has begun to slow, offering Americans some financial relief.
Gas prices, for example, have retreated from a record $5 a gallon last summer to just a little above $3, based on the average national cost of regular fuel. In some places, gas prices have even dropped below $3.
Whatever the case, don’t expect a repeat of January’s increase in sales. Restaurant receipts rose an average of 0.5% a month in the decade before the pandemic.
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