Update To The Fast-Food Spending Index

With the release of consumption data for July, it seemed like a good time to do an update to the fast-food spending index. As I’ve mentioned before, this seems like a good metric of how non-rich people feel about the economy. We know that much spending is being driven by the top 10 percent or so of the population, who are seeing substantial stock gains. However, we want to know how the bottom 90 percent — who depend primarily on wage income — are doing.

Fast-food spending provides a useful metric since it is unlikely that increases in spending would be driven by rich people eating their stock gains. Again, this is not saying that rich people don’t eat at fast-food restaurants. I’m sure many do. The point is simply that their spending is unlikely to increase in response to stock gains.

Fast-food spending is also useful in that it is very much a discretionary expenditure. If people are feeling stretched, it is easy to cut back on the frequency of eating out at fast food restaurants and instead cook at home. 

Here’s the picture. 

As can be seen, spending has been largely flat since the fall of 2023. In fact, it is still below the peak hit in September of 2023. There was a sharp dip in April of this year, following the start of the war in Iran. Spending has since bounced back, but it’s still virtually the same as it was three years ago. That doesn’t make it look like the non-rich are feeling very good about their finances. 

I realize that spending on fast-food restaurants could be affected by the increased use of Ozempic and related drugs. That is likely the case, but note that this did not stop fast-food spending from increasing rapidly in 2022 and continue rising in 2023. That was a period where spending on sugar and sweets at food stores fell rapidly, dropping almost 7.0 percent from the second quarter of 2022 to the fourth quarter of 2023. In the last three years it has edged down by another 2.0 percent. So, the spread of these weight-control drugs is likely a factor slowing growth in spending at fast-food restaurants, they cannot be most of the story.