• Joe Carson

Re-opening Indicator: Consumer Spending at Grocery Stores vs. Restaurants

Investors, analysts, and policymakers are trying to gauge the speed and breadth of the re-opening of the economy. A simple way to track re-opening is by comparing what people spend in total at restaurants (commerce outside the home) versus spending at grocery stores (consumption at home).

Before the pandemic people spent an equal amount at grocery and beverage stores as they did at restaurants and bars. But the closing of businesses and the work-from-home mandate fundamentally shifted where dollars were spent on food and drinks.

In March and April, people spent 2X at grocery and beverage stores as they did at restaurants and bars. The dramatic shift in spending patterns is not a surprise as service industries such as restaurants, hotels, entertainment, and recreation were closed in many parts of the country. But what is a surprise is the sharp drop off in the amount of money spent on food and drinks.

In March, total spending on food and drinks, regardless of location, was less than 2% below that of February, but by April spending was more than 20% below.

Results for spending patterns in May will be available tomorrow (June 16) when the Census Bureau releases its report on retail sales. The detailed sales data should show a sharp rebound in spending at restaurants and a decline in grocery stores.

The data will signal a "reopening" of the economy is in its early stages. But "re-opening" does not mean people are spending or businesses are operating anything close to what they did before the pandemic. Until the work from home mandate ends and leisure and business travel recovers investors should not expect a broad recovery. That's probably a 2021 story or later.

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