Key restaurant indicators for December (Part 5 of 15)
Consumer confidence
The following two entities collect and report consumer confidence monthly: the Conference Board and the University of Michigan. Both measures are indexed arbitrarily to 100. A higher level means consumers are positive about the economic condition. This increased confidence leads to an increase in spending.
Interpretation
The Conference Board’s Consumer Confidence Index as of December 2014 was 93.5, which was the second-highest level in seven years. The University of Michigan Consumer Sentiment Index was also up at 93.6 over the same period. Both of these have been rising since 2009 from the lows of 25.3 and 55.7, respectively. The Conference Board also reports consumer confidence index by age. The consumer confidence index for consumers under the age of 35, or Millennials, as of November 2014 was 108. It had reached a low of 36.8 in 2009.
Takeaway for the restaurant industry
The restaurant industry is increasingly focusing on consumers under the age of 35, as we learned in Must-know: Chipotle Mexican Grill’s 3Q14 earnings are strong. According to the NPD Group, a market research company, there are 59 million people between the ages of 23 and 36. The rising sentiment overall is a positive sign for restaurants such as Brinker International (EAT), Noodles & Company (NDLS), and Potbelly Corp (PBPB). This is also a positive sign for consumer discretionary sectors such as the ETF Consumer Discretionary Select Sector SPDR (XLY).
An increase in consumer confidence stems from several reasons, including employment conditions. This essentially results in people having an income to spend. Let’s look at this next.
Browse this series on Market Realist: