Restaurant index falls to 13-month low
Oct. 3, 2011
by Meat&Poultry Staff
WASHINGTON – The National Restaurant Association’s Restaurant Performance Index declined for the second consecutive month in August, due in part to declining sales and traffic levels plus continued uncertainty among restaurant operators.
A monthly composite index that tracks the health of and outlook for the US restaurant industry, the RPI stood at 99.4 in August, down 0.3 percent from July. August marked the second-consecutive month the RPI stood below 100, the level above which signifies expansion in the index of key industry indicators.
“The August decline in the Restaurant Performance Index resulted from softening of both current situation and expectations indicators, as well as Hurricane Irene,” said Hudson Riehle, NRA senior vice president of the Research and Knowledge Group. “Although restaurant operators reported net positive same-store sales results in August, their six-month outlook for both sales growth and the economy continued to deteriorate.
“It is important to note that the industry’s August performance is a substantial improvement over the 2008-2009 period, but overall, the near-term health of the restaurant industry will depend heavily on the economy’s ability to create jobs and bolster consumer confidence,” he added.
The RPI measures the health of the restaurant industry in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, and index values below 100 represent a period of contraction for key industry indicators. The RPI 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 99.3 in August – down 0.5 percent from July and the second consecutive monthly decline.
Although restaurant operators reported net positive same-store sales in August, the overall results were softer than recent months. Forty-five percent reported a same-store sales gain between August 2010 and August 2011, while 37 percent of operators reported lower same-store sales.
For the first time in three months, restaurant operators reported a net decline in customer traffic. Thirty-four percent of restaurant operators reported an increase in customer traffic between August 2010 and August 2011, down from 40 percent of operators who reported higher traffic in July.
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 99.5 in August – down 0.1 percent from July and the lowest level in nearly two years.
Restaurant operators’ outlook for sales growth continues to deteriorate. Thirty-three percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 39 percent last month and the lowest level in 19 months.
Restaurant operators remain generally pessimistic about the direction of the overall economy in the months ahead. Only 18 percent of restaurant operators said they expect economic conditions to improve in six months, compared to 17 percent who reported similarly last month.