From time to time I like to update you on key economic indicators. Some of these are standard items like retail sales and employment; others are more obscure. Today’s data would fall into the latter group.

As you know, sales of discretionary items are usually a good indicator of the direction of the economy. These items tend to cycle with economic growth on a consistent basis. When the perception of the public is that good times are ahead, sales of discretionary items tend to go up. Of course, as we saw in 2008 and 2009, the opposite is true as well.

The sale of wine for most consumers would fall into the category of a discretionary purchase, especially higher-end wines. As reported recently in the Los Angeles Times, “After a two-year slump, domestic wine retail sales in 2010 increased and U.S. wine exports jumped 26%. For the first time, the U.S. consumed more wine than France.”

This is welcome news to anyone selling discretionary items, especially retailers that carry a large inventory of wine. Last year, according to the Wine Institute, domestic wine sales grew by 7%. Most interestingly, U.S. wine exports reached $1.1 billion, which, as mentioned, was an amazing 26% increase over 2009. And while the French still drink substantially more wine per capita than Americans, the total amount of wine consumed in the U.S. surpassed the amount consumed in France.

In addition, more and more restaurant owners are reporting that diners are now ordering full bottles of wine instead of a single glass with their meals. Because of this, Technomic, a Chicago research firm, expects that overall alcohol sold at eating establishments in the U.S. will grow by nearly 2% this year. As the L.A. Times stated:

“People are feeling a bit more confident about the economy and are going back to what they know,” said Tom Klein, the Wine Institute’s chairman and Rodney Strong Vineyard’s vintner. “The wine industry, is it easy right now? No. But I think the industry has turned a bit of the corner. People are being smart about what they buy, but they are coming back.”

Also, it appears that aficionados are returning to more expensive brands. According to the Wine Institute, wine consumers who shifted to less costly vintages during the recession are now purchasing pricier brands. “Sales of wine in the $7-to-$14 category grew 5% in 2010,” according to the Wine Institute. Even higher-end wines are seeing an uptick in demand.

What the wine sales growth means for the economy

So what does this tell us? It reminds us that so much of our economic growth is based on perception and expectations. If the public, in general, expects that the economy is going to be good (good = I believe that I will have a job next month), then their spending patterns will match that expectation. Conversely, if our expectation is that the economy will be slipping in the foreseeable future, then our consumption will reflect that.

Wine sales clearly are impacted by what we expect the economy to be doing in the near future. Given the dramatic increase in overall sales as reported by the Wine Institute, the general public, or at least those among us that consume the beverage, expect the economy to be better than it has been. So even though unemployment remains high overall, the perception is clear, as indicated by our spending patterns, that we are “feeling” that things are improving and will continue to do so.

It will be very interesting to see how much wine is sold and consumed in the U.S. this year, especially in the latter half of the year since the media continues to focus on the bad news regarding the economy rather than the fact that, overall, we are much better off than we were two years ago!

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