Two recent articles crossed my desk this week and if accurate would suggest that the recovery in the USA restaurant market will not happen anytime soon.

First, the average American consumer still has way too much debt and is still in the process of de-leveraging. In the latest Quarterly Review of Hoisington Investment Management – a fixed income advisor – they attribute the continuing slow economic growth to over indebtedness and the abundance of non-productive debt. Private debt to GDP stood at 275% in Q1 2014, while the personal savings rate is close to the lowest in 100 years. There is simply not a lot of discretionary income to be spent. Also, they argue that Japan, Europe and the USA are all trying to solve an under-saving problem by creating more under-saving! The authors expect the interest on the 30 year treasury bond to decline to a range of 1.7-2.3% indicating continued weak economic performance.

Second, another paper by GaveKal Dragonomics, shows that the inflation rates for oil, food, and rent have been rising faster than the overall CPI, thereby impacting low income consumers far more than others. They call this the Walmart CPI. A fast rising Walmart CPI is in essence a negative tax on incomes and certainly impacts the ability to spend on discretionary items like dining out.

When you consider that many Americans who are living from paycheck to paycheck are also suffering from too much debt and rising prices for key life staples, it is no wonder that dining out remains soft. I am afraid that there is not a lot to cheer about for the next few years in the USA market!



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