Restaurant Performance Index hits record low in Dec.

by MEAT&POULTRY Staff
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WASHINGTON — As the nation’s meat and poultry businesses keeping searching for signs of a break in the ongoing economic crisis, December offered no signs of relief for the nation’s restaurant industry. The National Restaurant Association's comprehensive index of restaurant activity in December fell to another record low.

According to the association's Restaurant Performance Index, a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry, it stood at 96.4 in December -- down 0.2% from November and its 14th consecutive month below 100.

"The December decline in the Restaurant Performance Index was the result of a drop in the current situation component," said Hudson Riehle, senior vice president of Research and Information Services for the association. "Same-store sales results were the softest in the history of the Restaurant Performance Index, with nearly two-thirds of restaurant operators reporting lower sales in December."

The weak economy and declining sales continue to weigh on the minds of restaurant operators, Mr. Riehle added, as 45% of restaurant operators said the economy is the number-one challenge facing their business, followed by building and maintaining sales volume at 27%.

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 95.7 in December - down 0.5% from November and its lowest level on record. December also marked the 16th consecutive month below 100, which signifies contraction in the current situation component.

Restaurant operators reported negative same-store sales for the seventh consecutive month in December. Only 23% of restaurant operators reported a same-store sales gain between December 2007 and December 2008, down from 26% who reported a sales gain in November.

They are even more pessimistic about sales growth in coming months. Only 18% of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 21% who reported similarly last month. Forty-eight percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year.

Meanwhile, 17% of operators expect economic conditions to improve in six months, matching the proportion who reported similarly last month. However, 41% expect economic conditions to worsen in six months, down from 49% who reported similarly last month.

The R.P.I. is based on the responses to the N.R.A.’s Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor and capital expenditures. It consists of two components: the Current Situation Index and the Expectations Index. (Click this link to view this month's report: www.restaurant.org/pdfs/research/index/200812.pdf).

The R.P.I. is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction for key industry indicators.

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