Monday, May 3, 2010

More evidence of strong consumer spending


Car sales were up 20% in the 12 months ending April. This, in spite of the "cash for clunkers" program which presumably boosted sales in the third quarter of last year at the expense of future sales.

Separately, as Mark Perry notes, (see his post for details) restaurants enjoyed a huge boost in sales last March. Restaurant activity hasn't been this strong since September '07. I can add some anecdotal evidence to this: my wife and I went out for dinner last Saturday night, and were pleased to see that most restaurants in the area were full and there was lots of foot traffic in the downtown area.

5 comments:

John said...

Scott,

Thanks for this post on the restaurant industry. My largesr holding is Sysco (SYY) which is the country's largest foodservice supplier. I have had it many years and still get warm fuzzies when my wife and I go out to eat and I see evidence of their presence (for instance their name on the sugar packets on the table).

The restaurant business has had a rough time in the last several quarters but as your chart suggests they seem to be coming out of it. Going out to eat is a small ticket luxury and as unemployment comes down and confidence comes back this is an industry that will benefit. Sysco pays a good and rising dividend (listening Benj?) and is a solid, conservative way to play the economic recovery. Its not a world beating investment but its a lot safer than BP (IMHO) and I have slept soundly with it for many years.

If you take the plunge, do your OWN homework FIRST and try to pick it up on weakness. Exercise patience. This is NOT a volatile stock. Decent returns over a long period of time is what this company offers, not fast buck flips. You'll be paid to wait. If Scott is right about our economy this is the kind of conservative dividend paying company an investor can investigate and consider adding to a diversified portfolio.

John said...

Guys,

I am sorry my post got duped. After the first one I got a web page saying something about a conflicting edit and suggesting I try again. When I got back to the 'leave your comment' box my original post was absent so I tried again thinking I had lost my original post.

Again, please accept my apology. I only intended to post once on the subject.

Scott Grannis said...

John: thanks for the recommendation, it makes sense.

Benjamin said...

John-

Yes, brother, I am listening (to the dividends).

Good luck on SYY and all your investments.

W.E. Heasley said...

Mr. Grannis:

Re: More evidence of strong consumer spending.

What about Milton Friedman’s concept of “permanent income”? Permanent income is the average income a consumer expects over the medium term. In Friedman’s A Theory of the Consumption Function he argues annual consumption was a function of “permanent income”. Friedman was examining the Keynesian view that the consumer adjusted consumption based on current income.

The concept of “permanent income” sure doesn’t seem to get any press time in discussions of current consumer spending.