Buoyed by stronger same-store sales and customer traffic levels, the National Restaurant Association’s (NRA) Restaurant Performance Index (RPI) posted a modest gain in August.
The RPI—a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry—stood at 100.6 in August, up 0.4 percent from July and the first increase in five months.
August represented the 10th consecutive month that the RPI stood above 100, which signifies continued expansion in the index of key industry indicators.
“Growth in the RPI was driven largely by improving same-store sales and customer traffic results in August,” says Hudson Riehle, senior vice president of the research and knowledge group for the Association. “Six out of 10 restaurant operators reported positive same-store sales in August, while customer traffic readings bounced back from July’s net decline.
“In contrast, the Expectations Index remained dampened compared to recent stronger levels, with restaurant operators retaining a cautious outlook for sales growth and the economy in the months ahead,” Riehle adds.
The Restaurant Performance Index 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.
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 100.6 in August, up 0.8 percent from July’s level of 99.8.
After dipping below 100 in July for the first time in nine months, the August reading represents a return to expansion in the index of current situation indicators.
Restaurant operators reported positive same-store sales for the 15th consecutive month, with August results representing a solid improvement over the July performance.
Sixty-one percent of restaurant operators reported a same-store sales gain between August 2011 and August 2012, up from 53 percent who reported positive sales in July.
In comparison, 25 percent of operators reported lower same-store sales in August, down from 36 percent in July.
Restaurant operators also reported a net increase in customer traffic levels in August. Forty-seven percent of restaurant operators reported higher customer traffic levels between August 2011 and August 2012, up from 35 percent who reported positive traffic in July.
In contrast, only 32 percent of operators reported lower customer traffic levels in August, down sharply from 46 percent in July.
Despite the uptick in sales and customer traffic, restaurant operators reported somewhat lower levels of capital spending. Forty-one percent of operators said they made a capital expenditure for equipment, expansion, or remodeling during the last three months, down from 46 percent who reported similarly last month.
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 100.7 in August, unchanged from July’s level.
Although August marked the 12th consecutive month the Expectations Index stood above 100, it remained nearly two index-points below the post-recession peak reached in March.
Restaurant operators remain generally optimistic that their sales levels will improve in the months ahead, as their sales outlook was essentially unchanged from last month.
Forty percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), compared to 42 percent who reported similarly last month.
Meanwhile, only 12 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, down slightly from 15 percent last month.
Restaurant operators are not as bullish about the direction of the overall economy, though their outlook improved somewhat from last month.
Twenty-nine percent of restaurant operators said they expect economic conditions to improve in six months, up from 22 percent who reported similarly last month.
Meanwhile, 20 percent of operators said they expect economic conditions to worsen in the next six months, while 51 percent think conditions will stay about the same.
Restaurant operators’ outlook for capital spending dipped somewhat from recent months. Forty-four percent of restaurant operators plan to make a capital expenditure for equipment, expansion, or remodeling in the next six months, down from 49 percent who reported similarly last month.
News and information presented in this release has not been corroborated by WTWH Media LLC.