Economists keep close tabs on discretionary spending, such as eating out at restaurants, because it’s a reliable indicator of the strength or weakness of an economy. And restaurant sales have declined steadily throughout 2016, especially among middle-class-frequented restaurants such as Chipotle, Cheesecake Factory, and Panera Bread. Middle-class Americans are noticeably tightening their belts against tough financial times.
In a report about the recent restaurant recession, Paul Westra, a senior analyst at Stifel Financial Corp., said, “Restaurant industry sales tend to be the canary that lays the recessionary egg.”
“Those with higher health insurance costs are a full 30 percent more likely to say they are cutting back spending significantly,” said one analyst.
In other words — 2017 could mark the beginning of yet another recession, warns Westra.
Just before the recession in 2001, restaurant spending dropped off dramatically. Before the Great Recession of 2008, Americans’ restaurant industry again took a dive. These things obviously aren’t coincidences.
A new study conducted by CivicScience shows health care spending is largely to blame for the current issue. This particular decline in eating out hasn’t been accompanied by factors that usually contribute to it, such as increased gas prices. Some people have postulated that cheaper grocery prices mean people could save money by eating at home — but that usually leads to an increased amount of discretionary spending.
Researchers at CivicScience began by hypothesizing that political unrest has contributed to uneasiness, but that accounts for only 9 percent of people who reported decreased spending. By contrast — 47 percent of respondents who have experienced price hikes in health care spending also reported cutting back on eating out.
Related: It’s Official: Obamacare is Broken. Bill Clinton Said So.
“Those with higher health insurance costs are a full 30 percent more likely to say they are cutting back spending significantly,” writes John Dick, founder and CEO of CivicScience in Pittsburgh, Pennsylvania.
The strongest correlation in decreased spending exists among those who pay out-of-pocket insurance to comply with the Affordable Care Act mandate. Those who got insurance through their employer or who received government subsidies didn’t cut back as much in their discretionary spending. But those who bought and paid for it without subsidies were seven times more likely to cut back on eating out.
Related: Obamacare 2017: Higher Prices, Fewer Choices
With price hikes on premiums and deductibles looming in 2017, the outlook for many restaurants looks especially bleak. Westra warns the next 18 months will bring tough times for these businesses. In some states, experts estimate health care costs will increase by as much as 24 percent. Those states who still have multiple carriers in their public marketplaces will still see an increase of 11 percent in prices.
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Decreased restaurant spending could be a good thing. Wendy’s and Chipotle don’t exactly qualify as health food vendors, and eating out less frequently at these venues could lead to a leaner population. But probably not. These recessions don’t usually last long enough to make a lasting impact on public health. But if the coming recession is anything like the last one, we could be in trouble with more than our health care.
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