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Oysters Rockefeller or rotisserie chicken? The Fed is watching

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Oysters Rockefeller or rotisserie chicken? The Fed is watching
Chef Alex Seidel stands in front of his restaurant Fruition in Denver, Colorado, U.S., October 8, 2019. REUTERS/Ann Saphir   -   Copyright  Ann Saphir(Reuters)
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By Ann Saphir and Lindsay Dunsmuir

DENVER/WASHINGTON (Reuters) – The fortunes of Denver chef Alex Seidel are telling. Sales at his upscale eatery Fruition, which features Oysters Rockefeller and a $29 pork chop, are down for the first time since the restaurant opened in 2007, the year the last U.S. recession began.

But Seidel’s new venture Chook, a rotisserie chicken restaurant where he promises to feed a family of four for $40, is so popular that he’s planning two more outlets.

“Fast-casual” restaurants are growing around the United States, and competition for high-end restaurants like Fruition has increased in Denver in recent years. But it may also reflect a broader trend: U.S. consumers are cutting back.

“I’ve personally been worried about our economy for the last couple years,” Seidel said. “I’m surprised that it hasn’t affected us more already.”

Seidel’s experience is the kind of ground-level nuance that Federal Reserve policymakers are hungry for as they weigh whether consumer spending, which accounts for roughly 70% of economic activity, will continue to power the U.S. economy. Global growth is slowing and trade tensions are weighing on manufacturing and business investment. Next week, Fed policymakers will weigh whether to cut interest rates for a third time this year, and their take on U.S. consumers will have global economic ramifications.

The nation’s 17 central bankers may not have tried Seidel’s chicken or oysters, but they are getting hints from a patchwork of calls, surveys, in-person interviews and questionnaires about consumers’ true strength as they head into the interest-rate setting meeting on Oct. 29.

When hard data – like the Bureau of Labor Statistics’ monthly payrolls report, the Census Bureau’s monthly retail report, or the consumer spending report from the Bureau of Economic Analysis – are all moving in the same direction, the Fed’s choices are clearer.

But the U.S. economic picture is murky now. Unemployment is near a 50-year low, but business investment has dropped, which could affect job creation in the future. Economic growth continues, but the trade war threatens to slow it down. In this situation, soft data such as sentiment surveys and anecdotes from individual business and community leaders become increasingly valuable.

“I used to tell people at the table: Data is old by the time you get it, and what we are trying to do is get a sense of what is happening now,” said Richard Fisher, who in his decade as Dallas Fed President chatted regularly with dozens of executives ahead of each Fed meeting.

Intel from home builders prompted him to warn colleagues about a coming crisis in May 2007, months before the last U.S. recession began, Fed transcripts show. Less reliable was chatter from businesses in summer of 2008 that led him to warn about a surge in inflation that never came.

Still, says Fisher, who left the Fed in 2015, “I think this anecdotal evidence or input is helpful… particularly now because we are in a time of uncertainty.”

Kansas City Fed President Esther George has been a staunch opponent of rate cuts, and says she so far has seen few warning signs of a consumer slowdown. Nonetheless she is on the hunt for more information, and not just in the hard numbers. Community and business leaders in her district, which stretches from Wyoming to Oklahoma, “provide timely information that is not likely to appear in the data for several weeks or months,” she said.

Or, as Minneapolis Fed President Neel Kashkari explained in a St. Cloud, Minnesota town hall on Oct. 8, “My colleagues and I spend a lot of time traveling around the region, meeting with folks,” including business leaders, workers, students, and academics.

Kashkari then embarked on some soft data gathering of his own. He electronically polled his audience on how they felt about the economy, and read the responses aloud as they were projected on a word cloud behind him. They ranged from “good” to “hazy” to “recession,” and together were valuable feedback, Kashkari said. “This will help make me more informed about the economic outlook,” he told the audience.


The Federal Reserve cut interest rates for the first time in a decade in July and followed that with another reduction in borrowing costs last month. Investors are overwhelmingly betting on another interest rate cut at next week’s meeting, and U.S. president Donald Trump has been publicly pressuring the bank to do the same.

But Fed policymakers themselves remain divided on the issue, as they try to determine whether U.S. household spending will falter, as it has in other parts of the world. [nL2N270144]

There are some concerning signs. Last week, the government reported that U.S. retail sales, which represent about a third of consumer spending, fell for the first time in seven months in September. Consumer confidence also ebbed last month. [nLNSGLEFC6]  [nL2N26F106]

Every six weeks or so, staff at the 12 regional banks publish anecdotes they’ve gathered through reports from their board of directors, plus phone and in-person interviews and online questionnaires completed by businesses and other sources.

Accounts of consumer spending in this so-called Beige Book for September were mixed. In the Philadelphia district, contacts reported “solid traffic” at malls, while in the Atlanta region retailers were concerned the trade dispute would reduce upcoming holiday sales.

Consumers are dramatically cutting down on their overall spending at restaurants and bars and spending more at eating at home. (For a graphic please see:

Overall visits to restaurants – often the first thing to go when households tighten purse-strings – were flat in September, data analytics firm NPD Group says.

Trends at more expensive eateries may be particularly illustrative, as households with annual income above $70,000 represent the majority of spending on food away from home, Bureau of Labor Statistics figures show.

The Fed’s current considerations are part of a broader evolution for economists, San Francisco Fed President Mary Daly said earlier this month in an interview on the Freakonomics podcast. She confessed she was “totally wrong” to solely focus on hard data earlier in her career to assess the economy.

“Ultimately economics, if it’s going to be really good, has to be about people,” Daly said.

(Reporting by Ann Saphir and Lindsay Dunsmuir; Editing by Heather Timmons and Andrea Ricci)

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