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America Looks Like It’s Headed for a ‘Restaurant Recession’

Protestors Rally Outside Republican National Convention In ClevelandProtestors Rally Outside Republican National Convention In Cleveland
Restaurant goers look on as protesters march near the RNC Convention in Cleveland on July 18, 2016. Photograph by Justin Sullivan — Getty Images

It seems like no one wants to eat out when the world is in chaos, and one analyst says the U.S. is headed for a “restaurant recession.”

After downgrading 11 restaurant stocks on Tuesday, Stifel, Nicolaus & Co. analyst Paul Westra predicted a major downtown will soon hit, fueled by “U.S. politics, terrorism, social unrest,” and a resulting economic uncertainty, which is usually a sign of worse things to come.

“We warn investors that restaurant-industry sales tend to be the ‘Canary that Lays the Recessionary Egg,'” he wrote in a report.

Jefferies Analyst Andy Barish also foreshadowed a bear market for the struggling industry, predicting at least 18 months of low sales and high labor costs, according to MarketWatch.

 

Fast-food traffic dropped 1.3% in June for its third straight month of declines according to the latest industry report from MillerPulse in partnership with Nation’s Restaurant News. Casual dining fell 2.5%, which was its worst traffic number since February 2014.

“When sales and traffic are weakening, it’s hard to see the bright side,” the report said.

The grim restaurant numbers provide a stark contrast to the nation’s overall economic performance. By most measures, the U.S. economy is steady, if not booming, with job growth surging in June.

But analysts say poor restaurant sales mean the economic uptick won’t last much longer.

“[A U.S. restaurant recession] may also represent a harbinger to a U.S. recession in early 2017,” Westra wrote.