Industry and Economy Perspective
Q2 2024 Market Update
SUMMARY: Strong employment with inflation slowly ebbing helps smooth challenges of adverse weather and food prices in Q1 – Restaurant Operator optimism predominantly high
Over 300,000 jobs were added to US payrolls at the end of March - including 28,000 in the restaurant industry - leading analysts to speculate that additional interest rate cuts hoped for this year won’t happen. Restaurant industry employment at the end of 2023 topped the February 2020 pre-pandemic peak by over 37,000 jobs. (Nations Restaurant News) Inflation ticked up a tenth of a percentage point in mid-Q1, 3.2% versus 3.1% in January, down from a pandemic era peak of 9.1% in June 2022. Canada’s inflation rate declined to 2.8% mid -Q1. Target interest rate to control inflation by both the US and Canadian federal governments is 2%. (Associated Press, Statista, Reuters, US Federal Reserve, Bank of Canada) Large areas of North America experienced unusually cold weather fronts or rainfall early in Q1, negatively impacting restaurant sales and traffic. Same-store restaurant sales growth in the U.S. was -4.5% for the industry in January, the weakest monthly sales growth reported since February 2021. Store traffic also experienced a significant year-over-year slowdown during the month, down -7.1%, a 6.2 percentage point fall compared to December. ( Produce Bluebook) Prices for food-away-from home rose in the U.S. by 0.1 percent, the slowest monthly increase since March 2021 and for 2024, prices for most food categories are predicted to change at a rate below their 20-year historical average. Meal prices from Limited- Service restaurants (takeout only) rose in the first quarter 5.2% year-over-year, while full-service (sit-down restaurant) meals rose 3.8% year-over-year. (US Department of Agriculture, NerdWallet, US Bureau of Labor Statistics) Sales at Canadian restaurants and bars fell 1.9 percent in January to $7.9 billion. Sales at Ontario’s food service and drink ing places falling 1.1 % ($3.1 billion), 1.2 % ($1.5 billion) in Quebec, and 6.9% ($1.3 billion) in British Columbia. Canadian inflation cooled in February, increasing just 2.8% but restaurant meal prices went up 5.1% overall, 5.8% for fast food and takeout. (Statistics Canada) .
Convenience stores enjoyed record in-store foodservice sales of $360 billion in 2023, up 1.3 % from prior year. Average per- customer, per visit spend increased 3.7% to $7.80. (National Association of Convenience Stores)
16% of Foodservice Operators surveyed by Technomic in the first quarter of 2024 report being extremely optimistic about the economic outlook over the next six months; 4% are extremely pessimistic.
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