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Us - Consumers Skip Dining For Cars As Sales Slow: Ecopulse

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http://www.bloomberg.com/news/2013-08-23/consumers-skip-dining-for-cars-as-sales-slow-ecopulse.html

Results at casual-dining establishments fell 3.5 percent last month, following a 2 percent drop in June, according to the Knapp-Track Index. This marked the first two consecutive declines in the monthly index of restaurant sales after the industry was rocked by its worst streak in almost three years between December and February.

Preliminary data suggest that August sales still are weak, though “better than July,” said Malcolm Knapp, a New York-based consultant who created the index and has monitored the industry since 1970. The summer slowdown is a symptom of a “reallocation nation,” in which people choose between different discretionary items to purchase each month, he said.

Brinker International Inc. (EAT), Cheesecake Factory Inc. (CAKE), Texas Roadhouse Inc. (TXRH) and Bloomin’ Brands Inc. (BLMN) were among casual-dining restaurant chains that cited slower sales in their most-recent quarters, as several companies cut earnings guidance.

“Consumers’ priorities change every month based on what they can afford,” Knapp said. Many Americans don’t eat out as often as they would like, and they’ve had to cut back “very begrudgingly” on meals away from home to help subsidize other purchases.

So the American consumer realises how the economy works, pity the politicians don't who just want to keep spending and avoid making any choices.

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Hmm interesting. According to Peter Schiffs video blogs, most the US recent employment uptake has been in hospitality, and the latest gallop poll that tends to correlate quite well with the BLS one suggests unemployment has gone from 7.9% to 8.9% in ONE MONTH.

At least they have shiny new cars that might be paid off sometime into the next decade. Not that it'll weigh down on other purchases or anything...

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“Consumers’ priorities change every month based on what they can afford,” Knapp said. Many Americans don’t eat out as often as they would like, and they’ve had to cut back “very begrudgingly” on meals away from home to help subsidize other purchases.

Why would they be cutting back 'begrudgingly' they might want to do things differently by trying to improve their health, lifestyle and their pockets at the same time? ;)

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Much the same is happening in the UK, and it's difficult to see how we can have a meaningful recovery when earnings growth is persistently less than the inflation rate.

There are a couple of surveys I keep an eye on in this regard (alongside the official releases from ONS which don't tend to be very timely). These sources often have conflicting info in them and so it's general trends that I'm really looking for.

1) The Asda Income Tracker.

This monthly report measures household discretionary income and is compiled by ASDA in association with the CEBR. To be more specific the tracker measures gross household income, less taxes and less 'essential spending' such as groceries, electricity, gas, transport costs, and mortgage interest or rent payments.

The survey shows that there has been virtually no increase in discretionary spending power over the past four years, and since non-essential items have been increasing in price (in the aggregate), something has to give.

An anecdotal example might be this year's British Open golf championship at Muirfield, where despite glorious weather the attendance was well below expectations with glaringly empty stands for the first couple of days. Fingers were pointed at the ticket price, which has increased from £65 in 2011 to £70 in 2012 and £75 this year – a 15.4% uplift in just two years. It also cost £15 to park. The R&A denied that the gate price was anything to do with the low turnout and blamed the weather for being too hot.

AsdaITb.gif

AsdaITa.gif

2) Aviva Family Finances

This doesn't come out as regularly as the Asda IT, but the latest issue (July 2013) tells much the same story as regards discretionary spending. From the expenditure section:

"Luxury items are among the first to go when it comes to trimming household expenses. While spending on

food has gone up by £14 a month across all families in the last six months alone – equivalent to £168 per

year – a range of non-essential items including satellite TV subscriptions, entertainment and recreation have

all been scaled back to compensate."

AVIVAff.gif

You can see from these reports why the FPC is so concerned about the possible effects of even a small rise in mortgage rates. The most recent Financial Stability Report flagged this issue, highlighting the large number of mortgage borrowers who would struggle in the face of just a 1% rise in mortgage rates.

A 3% rise in mortgage rates in the face of static disposable incomes would be absolutely crushing for many households and would lead to a surge in distressed loans.

Edit: duplicate word.

Edited by FreeTrader

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Hmm interesting. According to Peter Schiffs video blogs, most the US recent employment uptake has been in hospitality, and the latest gallop poll that tends to correlate quite well with the BLS one suggests unemployment has gone from 7.9% to 8.9% in ONE MONTH.

At least they have shiny new cars that might be paid off sometime into the next decade. Not that it'll weigh down on other purchases or anything...

That will be interesting if reflected in the BLS stats, given QE is linked to unemployment...

To taper or not to taper, that is the question...?

(Hint: The answer is and always will be "not to taper")

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