Due to a softer outlook among restaurant operators for sales growth and the economy, the National Restaurant Association’s Restaurant Performance Index (RPI) declined for the third consecutive month. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.5 in August, down 0.2 percent from July’s level of 100.7. Despite the recent declines, the RPI remained above 100 for the sixth consecutive month, which signifies expansion in the index of key industry indicators.
“The August decline in the RPI was due almost entirely to a dip in the expectations indicators, with restaurant operators becoming less bullish about sales growth and the economy in the months ahead,” says Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association.
“In contrast, operators reported positive same-store sales and customer traffic levels in August, and a majority of operators reported capital expenditures for the fourth consecutive month,” Riehle says.
The RPI 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 100.7 in August – up 0.6 percent from July and the first increase in three months. In addition, the Current Situation Index stood above 100 for the fifth consecutive month, which signifies expansion in the current situation indicators.
A majority of restaurant operators reported positive same-store sales in August, and the overall results were an improvement over July’s performance. Fifty-three percent of restaurant operators reported a same-store sales gain between August 2012 and August 2013, up from 44 percent who reported higher sales in July. In comparison, 33 percent of operators reported a decline in same-store sales in August, down slightly from 36 percent in July.
Restaurant operators also reported stronger customer traffic levels in August. Forty-five percent of restaurant operators reported higher customer traffic levels between August 2012 and August 2013, up from 35 percent who reported a traffic gain in July. Meanwhile, 38 percent of operators reported a decline in customer traffic in August, down from 43 percent in July.
Along with positive sales and traffic results, restaurant operators continued to report positive capital spending levels. Fifty-three percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the fourth consecutive month in which a majority of operators reported expenditures.
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 100.4 in August – down 0.9 percent from July and the lowest level in eight months. Although an Expectations Index above 100 continues to suggest that operators are generally positive about business conditions in the months ahead, their optimism is somewhat dampened compared to recent months.
Restaurant operators are somewhat less optimistic about sales growth in the coming months. Thirty-six percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down slightly from 37 percent last month and the lowest level in 10 months. Meanwhile, 16 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 9 percent last month and the highest level in seven months.
Restaurant operators are also less bullish about the economy. Twenty-three percent of restaurant operators said they expect economic conditions to improve in six months, unchanged from last month. However, 22 percent of operators said they expect economic conditions to worsen in the next six months, up from 18 percent last month and the highest level in eight months.
With a more cautious outlook for sales growth and the economy, fewer operators are reporting plans for capital expenditures. Forty-five percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 53 percent who reported similarly last month.
News and information presented in this release has not been corroborated by WTWH Media LLC.