Eating Out and the Fall in Consumption

Calculated Risk is a great blog to check each day to see the latest economics news. Today there was an update about restaurant spending. Check out the figure from the past seven years. Notice how sharp the index in restaurant spending fell around September 2008. Clear evidence of a fall in consumption right when the credit markets started freezing up. In class we argued that this could be explained by consumers thinking that their expected future income would fall.

Later in the class we will also argue that the fall in consumption could be due to an income effect from the fall in the stock market.