The Scoreboard
Commentary
- Last week we learned that… the divergent rates of restaurant and grocery store inflation appear to be driving changes in the pizza space. Yes, that’s a narrow slice of analysis. However, it offers some potentially useful insights into where consumers find themselves. Food-at-home inflation has been running at a lower rate than restaurant price inflation since March 2023. Since then, Bureau of Labor Statistics data shows grocery prices up 1% while menu prices are 7% higher.
- We love pizza. We somehow keep eating more pizza. And data shows we’ll favor frozen pizza if we must. According to scanner data from UBS and AC Nielsen, frozen pizza sales volume at retail has increased by an average of about 12% year-over-year in the four months since May. Meanwhile, “big pizza” reported mediocre results for the first half of the year, with high prices cited as a challenge. How high? I went virtual shopping in Madison, Wisconsin – my home market – over the weekend. I looked at the online price of a medium, regular crust pepperoni pizza at Pizza Hut, Domino’s, Papa John’s, Little Caser’s and Glass Nickel (a popular local chain). They ranged from $8.49 to $16.88, with an average of $12.87. Then I visited Walmart.com to survey a variety of frozen pizzas – Home Run Inn, Digiorno, Red Barron, Jack’s and Great Value (Walmart’s private label brand). Those pizzas cost between $3.46 and $6.93, averaging $5.09. The takeout pizzas were 153% more expensive than the frozen pizzas. Using CPI data as a proxy, that spread is up from 149% last year and 145% in 2022. More viscerally, from a consumer budgeting perspective, a $7.78 gap seems notable, even before considering the hassle of going out to pick up a pie and/or the additional costs associated with a delivery pizza. In a belt-tightening environment for many families, popping a frozen pizza in the oven may seem easy and sensible. And I’m not convinced there’s a huge tradeoff in taste or experience. What does this mean for cheese, pepperoni or sausage demand? I cannot find any published data, but my hunch is that restaurant pizza has more. If so, it’s another piece of evidence that overall food volume sales are flat or even declining slightly in the current climate.
- Meanwhile, in the wider world, we saw one of the Fed’s favorite inflation indicators come in below expectations for August, with the PCE Price Index gaining 0.1% on the month compared to the consensus call for +0.2%. The final reading of the University of Michigan Sentiment Survey for September ticked higher to 70.1, ahead of the preliminary reading of 69.0 and expectations for more of the same. I’m guessing those reports have links, with slower headline price appreciation – and a retreat in gasoline – feeding somewhat better feelings about the economy. As far as the week ahead goes, it’s labor data time, with the Job Openings and Labor Turnover Survey report on Tuesday and the Employment Situation report landing on Friday. As of now, analysts expect to see 7.7 million openings for August (about the same as in July) and September payrolls increasing by 132,500, down from +142,000 in August.
China unleashed a series of stimulus measures designed to pump up its sagging economy. The central bank reduced reserve requirements, injecting an estimated $142.5 billion into the economy. According to Reuters, the government also announced various special bond and debt issues designed to increase subsidies for “consumer goods replacement” and to help local governments deal with debt problems. Households will also receive a monthly allowance of $114 per child per month for any youngsters beyond their first. Stocks roared on the news, with the Shanghai Composite index gaining 13% on the week and equity markets collectively enjoying the best week in 16 years. Various analysts also credited the measures for stirring some buying in commodity markets worldwide. Will the momentum persist? The big moves unveiled ahead of a major holiday week illustrate the depths of China’s issues. Manufacturing activity has been in the contraction zone for the past 17 months. The country is dealing with low inflation and occasional deflation – the headline price gauge is averaging +0.1% over the past 12 months. Retail sales are slow. Property markets are a mess. There’s lots of real trouble to navigate, a reality that could offer a sobriety check to markets. At the same time, stimulus is stimulus. It’s too early to know for sure, but perhaps it’s time to move China out of the bearish and into the neutral column for global commodity markets.
The space between consumer expenses and income narrowed in August. According to the US Bureau of Economic Analysis, the personal savings rate came in at 4.8%, down from 4.9% in July to the lowest level this year. There’s a little more room than was the case in August 2023 when the rate was at 4.5%.
Restaurant traffic picked up during week 38 and sit-down restaurants had another good showing in week 39. Placer’s measure of foot traffic at all restaurants was at +1.0% year-over-year the best showing in five weeks, with the QSR segment at 3.3%. For the week ending September 27, Open Table data put activity up 6.3% year-over-year for seated diners at restaurants that take reservations. I wonder: are lower gasoline prices moving dollars from the pump to the plate?
Cheese, butter and chicken sales slumped while beef and pork volumes increased during the week ending September 22. Circana had cheese and butter volume down by about 2% year-over-year. Chicken volume dropped by a fraction, while beef and pork sales increased by about 1%. Butter prices remain 12% above year-prior levels, but the cost did drop two cents from the week prior ($5.22 versus $4.24).
Several stores have cheese deals this week. USDA reports 12,017 outlets promoting six-to-eight-ounce shreds, up 1% on the week and up 42% year-over-year. Average price is at $2.50 per package, down a dime on the week but up 3% year-over-year. Butter features are up 6% on the week and 27% year-over-year, with prices down a whopping 68 cents (-14%) to $4.24 per pound.
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