Chart o’ the Day: Restaurants are Predicting a Recession

Stifel this morning (emphasis mine):

Conclusion: Today, we adopt a Bearish outlook for Restaurants as we confidently believe that, at a minimum, the simultaneous -150bps to -200bps deceleration of Restaurant industry comps across all categories during 2Q16 (of +0.7%A vs. 3Q14-1Q16’s +2.4%A) within our most recent Stifel Sales Survey reflects the start of a US Restaurant Recession – which, may also represent a harbinger to a US recession in early 2017; and, if so, Restaurants have historically led the market lower during the 3-to-6-month periods prior to the start of the prior three US recessions(Restaurants -23% vs. S&P 500’s -10%). The catalyst for the current weak pre-recessionary restaurant spending trend is likely multi-faceted (US Politics; Terrorism; Social Unrest; Global Geo-Politics; Economic Uncertainty) but, if history is a guide, we warn investors that restaurant industry sales tend to be the “Canary that Lays the Recessionary Egg” (i.e. the current -2% cut-back in dining out sales is a possible harbinger of a -2%-plus cut-back in the US consumers’ entire spending basket within 3-to-9 months (which accounts for ~70% of the US Economy).

…and their chart:

Specifically, in the 3-to-6-month periods prior to the start of the prior three US recessions, Restaurants have declined an average of -23% vs. the S&P 500’s -10%. To note, most of us are unaware that a recession has begun until several months after economists go back and pick a start-date (See Figure 6).

Screen Shot 2016-07-26 at 11.37.25 AM

Josh here – is a sample size of three definitive enough to call a recession in advance? What happens if restaurant comps start improving / accelerating out of nowhere? Isn’t it possible that, like so many other data points, the reality on the ground of ZIRP, NIRP, globalization and demography could lead to the economy defying yet another historic trope that no longer applies?

Stay tuned!


Turn Bearish on Restaurants; Adopt a US Restaurant Recession Outlook
Stifel – July 26th, 2016

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Homepage commented on Jan 14

    … [Trackback]

    […] Read More Info here to that Topic: […]