Despite uptick, economic downturn still affecting consumer behavior

 
May 11, 2009
Results from Technomic's latest consumer sentiment survey reveal that consumers continue to remain highly concerned about the U.S. economy, their personal financial situation and job security. More than half (51 percent) of consumers believe the economy will worsen this year and only 26 percent think it will improve.
 
Researchers also noted a jump in the recognition of the need to save more and spend less with 87 percent of respondents now saying that is their intention vs. 74 percent who said so in December 2008.
 
As a result, Technomic believes the foodservice industry will feel the effects of the prevailing pessimism. Goldin also notes that consumer sentiments suggest a near-term rebound in consumer food spending is highly unlikely.
 
However, a separate article written by Kevin Harlin highlights the better-than-expected first quarter earnings releases by retailers in the restaurant, casino and other discretionary industries, which are leading a market rally.
 
Thirty-four consumer discretionary firms in the S&P 500 have posted upside surprises vs. eight that have fallen short, according to Dirk van Dijk, director of research for Zacks Equity Research. On top of that, consumer spending rose at a 2.2 percent annual rate in Q1, brightening a 6.1 percent GDP decline.
 
But van Dijk notes that the bar for consumers was set pretty low after spending plunged in the second half of last year. Of those consumer discretionary companies that have reported, van Dijk says, net income is down 54.7 percent from a year ago.
 
"We've stopped the downward vertical. Now maybe we're just getting to the horizontal," he said.
 
And market researcher NPD Group reported Wednesday that traffic at eateries fell 1.5 percent in Q1. It was the second straight year-over-year drop with quick-service chains suffering their first decline since 2003.

Topics: Operations Management , Trends / Statistics


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