Uncertainty Over Future Business Conditions Dampens Restaurant Performance Index
Same-store sales remained positive for the 14th consecutive month; Restaurant operators’ outlook for the economy continued to slide
As a result of softer customer traffic and a dampened outlook among restaurant operators,
the National Restaurant Association’s Restaurant Performance Index (RPI) fell to its lowest level in nine months. The RPI - a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry - stood at 100.2 in July, down 1.1 percent from June and the lowest mark since a reading of 100.0 in October. However, July still represented the ninth consecutive month that the RPI stood above 100, which signifies continued expansion in the index of key industry indicators.
“Although restaurant operators reported positive same-store sales for the 14(th) consecutive month in July, their economic outlook for the months ahead continued to soften,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Only 22 percent of restaurant operators expect economic conditions to improve in the next six months, the lowest level in 10 months.”
“Despite their uncertainty, roughly one-half of restaurant operators still plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, which is a positive indicator for both the industry’s supply chain and the overall economy,” Riehle added.
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 99.8 in July - down 1.7 percent from June’s level of 101.5. Although same-store sales remained positive in July, the softness in the labor and customer traffic indicators outweighed the performance, which led to a Current Situation Index reading below 100 for the first time in nine months.
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