International Investing

The housing collapse reaches far beyond construction workers, real estate agents, mortgage brokers, and builders. The decline in home equity extractions will result in a decline in consumption across all spending levels (except the rich, of course). First, people will give up or cut back on modest luxuries, like eating out:

The slowing economy is giving restaurants heartburn, with experts calling this the worst period for eateries in years.That’s because consumers are having their pockets picked by high energy prices, declining home values, tightening credit from the sub-prime real estate bust and the falling value of the dollar, which makes imported goods more expensive.
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P.F. Chang’s China Bistro Inc. recently reported a nearly 20% decline in third-quarter profit from a year earlier. Panera Bread cafes predicted that fourth-quarter earnings were unlikely to surpass those of 2006. Brinker International Inc., owner of Chili’s Grill & Bar and other chains, reported a 21% drop in fiscal first-quarter profit.

IHOP fell short of Wall Street expectations last month when it reported an $11.6-million third-quarter loss, contrasted with an $11.3-million profit a year earlier. Its conference call with analysts and investors included repeated references to the “difficult economic climate” faced by the restaurant industry.