July 11, 2019

Economic outlook for 2nd half of 2019 remains positive

Growth in the national economy slowed during the first half of 2019. Job growth averaged just 172,000 a month during the first six months of 2019, which was down from an average monthly gain of more than 223,000 jobs during 2018. In addition, consensus forecasts have U.S. gross domestic product (GDP) rising less than 2 percent during the second quarter, which would make the first half expansion the weakest two-quarter growth in more than a year.

To be sure, a slowing economy doesn’t mean a contracting economy, and there are currently no indications that job losses are on the horizon. Indeed, the National Restaurant Association expects the economy to maintain its positive trajectory – adding nearly 1 million additional jobs during the second half of 2019. This translates to an annual increase of 1.6 percent for 2019, which is only slightly below last year’s gain of 1.7 percent.

Continued job growth is certainly good news for restaurants, as total industry sales have never contracted without a corresponding decline in the labor market. Even amid the backdrop of a slowing economy this year, consumers ramped up their spending on food away from home. Eating and drinking place sales rose during each of the first five months of 2019, with total sales surpassing their previous seasonally-adjusted record high registered in summer 2018.

Uncertainties abound, and there are plenty of potential landmines that could negatively impact consumer or business sentiment. As such, the risks to the economic outlook are more heavily tilted to the downside. But at this point, it is safe to assume that households on the aggregate will remain in a relatively good financial position through the end of 2019.

This outlook is supported by recent trends in a number of macro indicators:

Household net worth continues to rise

Buoyed by rising house prices and one of the longest-running stock bull markets in history, household wealth trended steadily higher in recent years. After a drop of nearly 4 percent in the fourth quarter of 2018, total household net worth rebounded to top $108 trillion in early 2019. This is 57 percent above its pre-recession peak in 2007, and has a positive impact on the current and future financial decisions of consumers.

Personal savings rate remains elevated

Consistently during the last few years, personal savings as a percentage of disposable income remained in a range between 6 percent and 8 percent. This is nearly double the savings rate of consumers during the years leading up to the Great Recession, and indicates that households continue to build up a financial cushion.

Consumer debt is rising…

A potential risk to the consumer outlook is the steady increase in household debt. One illustration is the fact that total revolving credit balances are approaching $1.1 trillion. Although households have lower debt burdens and are more equipped to handle this debt than in years past, it still presents risks.

…but household debt service remains historically low

Although total consumer debt continues to rise, the level of debt remains manageable for most households. The Federal Reserve’s Financial Obligations Ratio, which is the ratio of total required household debt payments (plus rent on primary residences, auto lease payments, insurance and property tax payments) to total disposable income, remains below pre-recession levels and near historic lows.

Read more analysis and commentary from the Association's chief economist Bruce Grindy.