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Restaurant Indicator: Savings Rate And Disposable Income Increase

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Savings rate and disposable income

The US Bureau of Economic Analysis releases savings rate and disposable income data every month. The savings rate is the percentage of disposable income that gets put aside in retirement accounts, stocks, 401(k) plans, and money market funds. Disposable income is the personal income left after income taxes.

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Monthly figures

In November 2014, the savings rate decreased by 20 basis points or 0.2% month-over-month, and disposable income increased by 32 basis points month-over-month. On a year-over-year basis, disposable income has increased 10%, as you can see in the chart above.

Positive for restaurants

Personal disposable income has been rising since January 1990. However, the personal savings rate has been volatile, dropping sharply in 2013 to 5% year-over-year. This could mean that consumers are spending more.

Increased consumer spending is positive for restaurant companies such as Chipotle Mexican Grill (CMG), Panera Bread (PNRA), Yum! Brands (YUM), and Darden Restaurants (DRI). It is also good for the Consumer Discretionary Select Sector SPDR ETF (XLY).

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Revolving credit increased to $882 billion in October 2014 from $881 billion in September, further indicating that spending and consumption have increased. A better measure of consumption is the PCEPI (personal consumption expenditure price index), which we discussed in an earlier part of this series.

Takeaway for restaurant industry

Here are some good ways to get customers to spend more at a restaurant and increase the average check:

  • provide complementary items
  • increase sides
  • offer combo meal upgrades

The National Restaurant Association specifically tracks indicators for the restaurant industry. The association reports its findings in the Restaurant Performance Index. Let’s look at this next.

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