Restaurant Performance Index hits two-year high

by Bryan Salvage
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WASHINGTON – In February, the National Restaurant Association’s Restaurant Performance Index (R.P.I.) rose to its highest level in 27 months – driven by a solid improvement in restaurant operators’ outlook for sales growth, capital spending plans and staffing levels. The comprehensive index of restaurant activity totaled 99.0, up 0.7 percent from January and its strongest level since November 2007.

“The R.P.I.’s strong gain in February was the result of broad-based improvements among the forward-looking indicators,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the association. “Restaurant operators’ optimism for sales growth stood at its strongest level in 29 months, with capital spending plans also rising to a two-year high.”

“In addition, restaurant operators reported a positive outlook for staffing gains for the first time in more than two years,” he added. “This bodes well for replacing the more than 280,000 eating and drinking place jobs lost during the recession.”

A monthly composite index that tracks the health of and outlook for the U.S. restaurant industry, the R.P.I. remained below 100 for the 28th consecutive month. The index consists of two components, the Current Situation Index and the Expectations Index. The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 96.7 in February – up 0.1% from January’s level of 96.6. February, however, represented the 30th consecutive month below 100, which signifies contraction in the current situation indicators.

Restaurant operators reported negative same-store sales for the 21st consecutive month in February, with the overall results similar to the January performance. Customer traffic also remained soft in February, as restaurant operators reported net negative traffic for the 30th consecutive month. Capital spending activity continued to drop off.

However, restaurant operators are increasingly optimistic about improving conditions in the months ahead. The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures, and business conditions), stood at 101.4 in February – up 1.2% from January and its strongest level in 29 months. The Expectations Index also stood above the 100 level for the second consecutive month, which signifies expansion in the forward-looking indicators. Equally important, restaurant operators are increasingly optimistic about sales growth in the months ahead. Restaurant operators are also more optimistic about the direction of the economy. Thirty-eight percent of restaurant operators said they expect economic conditions to improve in six months, while just 13% expect economic conditions to worsen during the next six months.

Restaurant operators’ plans for capital expenditures continued to expand. Forty-eight percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 43% who reported similarly last month and the strongest level in two years.

For the first time in more than two years, restaurant operators reported a positive outlook for staffing gains in the months ahead.

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