Photograph Source: witapepsi – CC BY 2.0

I have been obsessing on fast food since the days when the pundits told us to ignore the data showing rising real wages, people can’t make ends meet. The reason for focusing on fast food is that eating out is pretty much the ultimate discretionary spending item. If people are feeling stretched financially, reducing the number of times they eat out is about the simplest possible way to save money.

Fast-food dining is also a useful category because we can be fairly safe in assuming that the data are not skewed by high-income people. It is plausible that a surge in restaurant dining could be driven by higher income people eating their gains in the stock market.

That is not a plausible story with fast-food restaurants. The point is not that people earning six-figure salaries don’t dine at McDonald’s or Taco Bell, surely many do. However, it is not likely that they will hugely increase their dining at McDonald’s or Taco Bell because the value of their 401(k) is soaring. In fact, a jump in the value of their 401(k) might get them to eat less at fast food restaurants and instead get their meals at more expensive sit-down restaurants.

For this reason, I have viewed real spending (that is adjusted for inflation) at fast-food restaurants as a good measure of how people actually feel about their financial situation. People’s answers to questions on how they are doing in polls or focus groups are inevitably influenced by what they hear on the news or from their friends and family. But what they actually do is likely to give us a better sense of how they view their financial situation.

By this measure, things seemed to look pretty good for the first three years of the Biden administration. Spending on fast-food restaurants grew rapidly in 2021 and through 2022 and most of 2023. At its peak in the third quarter of 2023, spending was 10.8 percent above the pre-pandemic level. While people might have been telling pollsters they couldn’t make ends meet, and news reporters kept highlighting tales of economic hardship, they were spending as though things were pretty good.

That is no longer the case. Spending in fast-food restaurants pretty much stagnated in 2024 and has trended downward this year. Real spending in July was almost a full percentage point below its November level.

This is actually consistent with what people are telling pollsters and focus groups; they say they feel financially stretched. This is also consistent with the data showing inflation picking up and wage growth slowing, especially at the bottom end of the labor market. Wages for restaurant workers are no longer growing faster than inflation.

With tens of millions of people now having to repay student loans and the prospects of large cuts to subsidies in the Obamacare exchanges, as well as cuts to Medicaid coming in the not distant future, it is understandable that many people feel the need to tighten their belts. And that is what they seem to be doing.

This first appeared on Dean Baker’s Beat the Press blog.

The post What the Fast Food Spending Index Says About Consumer Sentiment in the US appeared first on CounterPunch.org.

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