According to proprietary data collected from Bank of America Merrill Lynch’s customers, consumer spending continued to support the US economy during September. According to the bank retail sales, ex-autos increased 0.4% month-on-month seasonally adjusted in September. Year-on-year retail sales ex-autos are 1.9% according to Bank of America aggregated card data, in line with the Census Bureau data. Beyond retail sales ex-autos, spending is up 4% year-on-year including overall services spending and auto unit sales.

One industry that is not benefiting from rising consumer spending is the restaurant industry. According to the September reading of the Knapp-Track casual dining study, sales declined 1.9% for the month with guest counts down 4.2%.

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Casual dining consumer spending continues to collapse in September

The Knapp-Track casual dining sales tracking study includes more than 50 casual dining brands with aggregate sales of about $30 billion, representing a substantial portion of the chain casual dining sales. The survey is widely accepted as an industry benchmark for casual dining sales.

September’s weak showing followed weak numbers in August and July. The September reading was the second-worst monthly performance of 2016 with only June results softer.

According to Mr. Knapp (restaurant industry consultant and founder of the Knapp-Track survey) who spoke with analysts at Bank of America after the publication of the September Knapp-Track reading, September’s spending weakness can be attributed to pent-up spending on higher ticket items siphoning off consumers’ cash away from everyday purchases such as dining out. Moreover, Mr. Knapp believes there could be some consumer “anxiety and distraction related to the raucous Presidential election” putting the brakes on consumer spending.

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However, it would appear that the consumer’s desire to dine out remains of substantial. According to a survey conducted by the National Restaurant Association, 45% of consumers indicated that they are not eating out as much they would like. While this reading is down slightly from the reading of 48% recorded a year ago, Mr. Knapp notes that the decline has been driven by low-income consumers. For this reason, he is unconcerned.

Another reason why Mr. Knapp is generally unconcerned with the data is the skew of restaurant industry data, specifically around oil producing regions which have seen the largest declines over the past few months. Texas same store sales remain especially soft as the weakest of 11 Knapp-Track regions with the gap versus the national average widening in August. Texas comps were down 3.7% during the month of September versus the overall Knapp-Track reading of 1%. In July, the gap was 150 bps with Texas down 2% versus Knapp-Track down 0.5%.

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