Bar Hopping and Restaurant Sales Demonstrate that the American Economy is Still Strong

When the economy is strong, more people dine out, and they do so more frequently.

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One of the first things Americans do is cancel dinner plans when the economy is struggling and teeters on the verge of a recession. However, consumers aren't currently doing that.

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The largest increase in sales at bars and restaurants in 22 months occurred in January when they increased by 7.2%. Receipts increased by 25% over the previous year, which is over four times the rate of inflation during the same time period.

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The rise in restaurant sales, which followed slight drops in the last two months of 2022, suggests that the U.S. economy may still be expanding at a fair clip despite rising interest rates engineered by the Federal Reserve to rein in high inflation.

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Americans' desire to be outside more after being locked up during the COVID-19 outbreak may be partly to blame for the present spike. Economists predict that this unmet need will eventually be satisfied. A significant 3% increase in total retail sales in January was described as a "short-lived burst" by Oxford Economics.

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Most Wall Street DJIA, -0.26% economists projected a significant downturn in the U.S. economy at the beginning of the year. They noted rising borrowing prices, which have the propensity to restrain consumer spending, the primary driver of GDP.

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Oren Klachkin, the head U.S. economist at Oxford Economics, stated in a note to clients that "we still expect a recession later this year."

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Other economists said that the government's formula for correcting the statistics for seasonal swings overstated the surprisingly high increase in retail sales in January. This has occurred frequently since the pandemic.

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According to Bank of America, "the indicators indicate robust, but not booming, goods demand."

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However, Americans' strong appetite to eat out or order delivery suggested the economy may have some staying power.

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What's causing the spending to rise?

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For starters, the majority of Americans who want employment can do so. Last month, the unemployment rate in the country dropped to a 54-year low of 3.4%, showing a competitive labor market where wages are rising at the quickest rate in decades.

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At the same time, inflation has started to decline, providing some financial comfort to Americans.

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Based on the average national price of ordinary gasoline, gas prices, for instance, have decreased from a record $5 per gallon last summer to just a little bit over $3. The cost of gas has fallen below $3 in several locations.

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In any event, don't anticipate a repetition of the sales growth from January. The decade prior to the pandemic saw an average monthly increase in restaurant receipts of 0.5%.