Americans Are Eating Out Like Crazy As They Complain About Inflation and High Rates

Eating out, more formally known as Food Away from Home (“FAH”) or Away from Home Dining, is a large component of U.S. retail sales and consumer spending, accounting for $975 billion of sales last year, or approximately 18% of U.S. retail sales — more than sales at supermarkets and grocery stores. The category includes all forms of eating out, including fast food (usually called “quick service” these days), casual dining and fine dining, as well as prepared food delivery orders to the home. As measured by the U.S. Census Bureau, the category is called Food Services & Drinking Places, and includes bars and cafes as well.

Spending in this category tells a lot about the state of the consumer. Especially for lower- and middle-income Americans, eating out more frequently is one of the first indulgences when consumers have a few extra bucks in their pockets or bank accounts, and one of the first spending cutbacks when they are feeling pinched. (Do I really need that $5 latte four times a week?) It’s a painless cutback for most consumers when times get tough. FAH is considered discretionary spending but is less sensitive to economic conditions than big ticket purchases, such as furniture or electronics, and is more akin to spending in categories like theme parks, concerts, or movies. Hence, FAH is a good indicator of consumers’ financial health and general spending mood at any given moment. Judging from FAH spending since mid-2022, most Americans have been feeling perfectly fine for many months despite high inflation and the Fed’s best efforts to slow the economy. In fact, Americans are eating out more than ever recently, and this belies the notion that consumers are pulling back much on spending as rate hikes and high inflation eat away at disposable income. On the contrary, FAH spending has accelerated to date in 2023 [Figure 1] despite economic headwinds that confront most consumers.

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