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Restaurant Performance Index Rose Slightly in August 2007
added: 2007-10-01

The outlook for the restaurant industry remained positive in August, as the National Restaurant Association's comprehensive index of restaurant activity registered a modest gain. The Association's Restaurant Performance Index (RPI) - a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry - stood at 101.1 in August, up 0.2 percent from its July level of 100.9. In addition, the RPI remained above 100 for the 52nd consecutive month, which represents expansion in the Association's composite index of eight key industry indicators.

"The August increase in the Restaurant Performance Index was fueled by broad-based gains in the current situations indicators," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "Solid gains in same-store sales, customer traffic and capital spending propelled the Current Situation Index to its strongest level thus far in 2007."

The Restaurant Performance Index is based on the responses to the National Restaurant Association's Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor and capital expenditures. 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 101.2 in August - up 0.7 percent from July and its strongest level since December 2006.

Growth in the Current Situation Index was bolstered by a solid same-store sales performance in August. Fifty-four percent of restaurant operators reported a same-store sales gain between August 2006 and August 2007, up from 48 percent who reported a sales gain in July. Twenty-nine percent of operators reported a same-store sales decline in August, down from 36 percent who reported similarly in July.

Restaurant operators also reported stronger customer traffic levels in August. Forty-four percent of restaurant operators reported an increase in customer traffic between August 2006 and August 2007, up from 38 percent who reported similarly in June. Thirty-two percent of operators reported a traffic decline in August, while 24 percent said their customer traffic levels were about the same as they were in August 2006.

In addition to the stronger sales and traffic results, capital expenditure activity was stronger in August. Fifty-eight percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the strongest level in nearly three years.

"Although the current situation indicators registered a solid performance, restaurant operators' short-term outlook remained somewhat cloudy," Riehle added. "Operators' expectations for sales growth were less bullish than recent months, while their outlook for the overall economy also softened."

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 100.9 in August - down 0.3 percent from July and its lowest level in a year.

Restaurant operators' outlook for sales growth declined for the second consecutive month. Forty-four percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 49 percent who reported similarly last month. Nineteen 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.

Restaurant operators are also less optimistic about the direction of the overall economy. Twenty-four percent of operators expect economic conditions to improve in six months, down from 26 percent who reported similarly last month and the lowest level in the five-year history of the Restaurant Performance Index. Twenty-seven percent of operators said they expect economic conditions to worsen in six months, while 49 percent expect economic conditions to remain about the same.

Although their outlook for sales growth softened, there was a modest uptick in restaurant operators' plans for capital spending. Fifty-six percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 54 percent who reported similarly last month.


Source: PR Newswire

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