WASHINGTON – A significant decline in restaurant operator optimism in October pulled the National Restaurant Association’s Restaurant Performance Index (RPI) to 99.5, below 100 for the first time in 14 months. Falling below 100 is a sign of industry contraction, according to the NRA.
“Although restaurant operators overall continued to report positive same-store sales in October, their short-term outlook for sales growth and the economy is decidedly more pessimistic,” said Hudson Riehle, senior vice-president of the NRA’s research and knowledge group. “Nearly two out of five restaurant operators expect business conditions to worsen in the next six months, which is double the proportion that expect conditions to improve.”
The RPI’s current situation index, which measures current industry trends in the areas of same-store sales, traffic, labor and capital expenditures, was 99.3 in October, a 0.6 percent decline compared with September. While same-store sales remained positive in October, declines in the labor and customer traffic indicators outweighed the performance, according to the NRA.
The index’s expectations component, which measures operators’ six-month outlook for same-store sales, employees, capital expenditures and business conditions, stood at 99.7 in October, a 1.2 percent decline when compared with September.
Restaurant operators’ outlook for sales growth has deteriorated significantly in recent months, the NRA said. Thirty-one per cent of restaurant operators expect to have higher sales in six months, compared with the same period in the previous year, down from 45 percent in September and the lowest level in three years. Meanwhile, 21 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, up from 11 percent in September.
The NRA also reported that restaurant operators are increasingly pessimistic about the direction of the overall economy. Only 20 percent of restaurant operators said they expect economic conditions to improve in six months, down from 26 percent last month. In contrast, 38 percent of operators said they expect economic conditions to worsen in the next six months, up from 18 percent in September and the highest level in nearly four years.