May 22, 2017 - The U.S. economy has been expanding for nearly eight years and appears on track to surpass the 10-year record set in the 1990s. Gross domestic product (GDP) growth should accelerate from 1.6 percent in 2016 to 2.4 percent this year (despite some recent flux) and 2.6 percent in 2018.1 Expected policy changes from the Trump administration, such as corporate and personal tax cuts starting in 2018 and a modest increase in infrastructure spending, should have a positive impact on future growth. Faster business investment—especially in energy—should also help improve economic growth. Despite some instability and polarization among Americans since the U.S. election, consumers are faring very well. Record household wealth, higher wages and job growth are helping to drive gains in overall consumer retail spending, including key merchant categories:
Restaurant spending has accelerated, thanks in part to the strong job market
Growth in restaurant spending has closely followed job growth over the past several years. U.S. employment growth has been robust, with 2-3 million net new jobs created each year in 2014, ‘15 and ’16, prompting wages to go up. Restaurant spending—which outpaced growth of overall retail sales and continues to be one of the strongest merchant categories—showed a parallel uptick. It peaked at over 9 percent growth in early 2015, according to the Visa Retail Spending Monitor, which reports spending on all forms of payment. During that period, job growth was particularly robust with an average of 200,000-300,000 jobs per month. This helped to drive the unemployment rate down to below 5 percent. Recently, job growth has slowed a bit—down to about 180,000 jobs added per month in 1Q2017—and restaurant spending has followed suit. It has been expanding at a 5 percent pace over the past six months, still very strong. After all, dining out is one of America’s favorite past time.
Watch the video below for a discussion on this topic with Chief Economist Wayne Best and Economist Corrine Fusso.