Economic Outlook
- The Philadelphia Fed is forecasting +1.9% real GDP growth for 3Q23 which is significantly lower than the Atlanta Fed’s +5.9% GDPNow forecast as discussed in this post. This brings to mind Winston Churchill’s admonition that if you put 2 economists in a room, you get 2 opinions, unless one of them is Lord Keynes, in which case you get three opinions…
- In any case, the Philly forecast is looking for a steady slowing of GDP growth for the following 3 quarters as the labor market continues to loosen.
- Who can say whether the sub 3% CPI forecast will be sufficient to keep the Fed from hiking interest rates. It should be given such a tepid GDP forecast, but we are analysts and not economists so what do we know!
Capital Markets Commentary
- August was a bad month for QSR stocks, which is somewhat surprising given ongoing commodity relief and decent July retail numbers reported for restaurants in this post.
- Maybe August’s results were just about profit taking, just in case, given strong YTD stock performance.
- FSR stocks were hit even harder than QSR during August as investors generally consider dine-in as more discretionary than fast food.
- All-the-same, eating out does represent an affordable luxury that consumers are slow to relinquish, and Brinker recently reported that its quarterly dining room traffic improved y/y and there was no sequential frequency decline from low-end customers, a slight decline with middle-income customers, and an increase among high-income customers.
