A Rebound for Restaurants?

During a recession, cutting discretionary spending is one step consumers take to deal with their uneasiness. Since it's just a matter of will and not need, cutting non-necessity expenditures is one of the last temporary behaviors to change once the recovery begins. Dining at restaurants is perhaps the quintessential kind of discretionary spending that gets hit when consumers pull back: for most Americans, it's easy enough to get cheaper food at the grocery store and cook. Yet recent data shows that even the market for dining out appears to be improving.

Yesterday's retail spending numbers showed that expenditures at "food services and drinking places" increased in March. Spending was up 0.3% from February and increased 3.2% compared to a year earlier. Granted, the weather may have had something to do with it: no one wants to go out to eat when it's cold and awful outside, and March provided unusually delightful weather to much of the U.S.

But the New York Times reports on some additional data that shows March's improvement for restaurants might be more than a blip. One industry analyst the article quotes says that the month's sales gain may seem small, but it reversed 10 months of negative sales. It's hard to believe that only weather would have driven such a substantial change. The Times additionally notes that hiring began in the first three months of 2010 in the food service industry, after layoffs plagued the sector for all but three the 25 months of the recession prior to this year.

Yet the restaurant recovery might not be felt everywhere. The Times also reports:

Buddy McClain, who owns 71 Sonic stores in the South, said that while sales were not growing, they had finally stopped falling in March at his Mississippi and Alabama outlets.

But in Florida, a state hit hard by the recession and the collapse of the real estate market, year-to-year sales comparisons have been negative for 17 consecutive months. In March, he said, sales at his Florida stores were 15 percent below the already reduced levels of a year ago.

This could imply that regional economies will come out of the recession at differently times. Indeed, as March's foreclosure data shows, a handful of states are doing far worse than the others. The top 10 states account for more than two-thirds of foreclosures. March's state-by-state unemployment data, which will be released tomorrow, may shed additional light on this possibility. But in February, some of the usual suspects most damaged by the housing market's collapse did suffer from additional unemployed residents, including 21,600 more in Florida -- a larger increase than in any other state. Arizona, Nevada and California also saw gains.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

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