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How Consumer Confidence Affects Restaurant Sales

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Consumer confidence

Two separate entities collect and report on 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 economic conditions. Increased confidence leads to an increase in spending.

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Recent findings

As of April 2015, the Conference Board Consumer Confidence Index was 102.2, up from 96.5 in March. In the same month, the University of Michigan Consumer Sentiment Index was also up at 95.9, compared to 91.2 in March. Both indices have been rising since 2009, when they saw respective lows of 25.3 and 55.7.

The Conference Board also reports consumer confidence index by age. The confidence index of those under 35—Millennials—was 128.2 as of March 2015, the highest recorded level over the trailing twelve months.

Takeaways for the restaurant industry

The restaurant industry is increasingly focusing on consumers under the age of 35. This includes Chipotle Mexican Grill (CMG) and many others. According to research firm the NPD Group, there are 59 million people between the ages of 23 and 36.

Rising consumer confidence among Millennials is a positive sign for restaurants including Brinker International (EAT), Noodles & Co (NDLS), and Potbelly (PBPB). This is also a positive sign for the Consumer Discretionary Select Sector SPDR Fund (XLY). XLY invests about 1% of its portfolio in fast-casual restaurant Chipotle Mexican Grill.

One good way to get customers spending more at restaurants is to increase complementary offerings, offer sides, or a combo meal upgrade. This helps increase the average check.

The National Restaurant Association tracks specific restaurant industry indicators and produces a composite index called the Restaurant Performance Index.

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