September has been a rough month for supermarkets so far. According to a recent article from The Motley Fool, grocery stocks are down an average of 12% through September 12, 2016 and are raising concerns about food deflation.
While this might be good news for consumers shopping for their meals, supermarkets must present heavy promotions to keep business. This may also sound like a positive for those in the restaurant industry that compete with supermarkets for a piece of the consumer’s spending on food, but with food deflation, that is not the case.
Consumer spending at grocery stores increases when they can take advantage of lower prices instead of going out to eat. Restaurants may save some expenses on lower commodity prices, but with less traffic coming in, it doesn’t result in profits. Analysts are calling for a “restaurant recession” as this trend continues to develop.