July Restaurant Index dips due to soft sales
As a result of softer sales and traffic levels and restaurant operators’ dampened outlook for the economy, the National Restaurant Association’s Restaurant Performance Index (RPI) declined for the second consecutive month in July (most recent data).
The RPI stood at 100.7 in July, down 0.6 percent from June’s level of 101.3. Despite the decline, the RPI remained above 100 for the fifth consecutive month, which signifies expansion in the index of key industry indicators.
“The RPI’s July decline was the result of pullbacks in both the current situation and expectations indicators,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association.
“Most notably, restaurant operators’ outlook for the economy fell to a five-month low, with only 23 percent of operators expecting business conditions to improve in the next six months.”
The RPI consists of two components—the Current Situation Index (measuring current trends) and the Expectations Index (measuring restaurant operators’ six-month outlook)—and tracks the health of and outlook for the U.S. restaurant industry.
The Current Situation Index stood at 100.1 in July, down 0.6 percent from a level of 100.7 in June and the second consecutive monthly drop. Despite the recent declines, the Current Situation Index remained above 100 for the fourth consecutive month.
Although restaurant operators continued to report net positive same-store sales in July, the results were softer than the previous two months. Restaurant operators reported a net decline in customer traffic for the first time in three months.
The Expectations Index stood at 101.3 in July, down 0.6 percent from June and the lowest level in seven months. Despite the decline, each of the four expectations indicators stood above 100 for the seventh consecutive month, which indicates restaurant operators remain generally optimistic about business conditions in the months ahead.
Restaurant operators’ outlook
Restaurant operators’ sales outlook was dampened somewhat from previous months. Thirty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 46 percent who reported similarly last month.
Meanwhile, 9 percent of operators expect their sales volume in six months to be lower than it was during the same period in the previous year, compared to 11 percent last month.
Restaurant operators are also less optimistic about overall economic conditions. Twenty-three percent of restaurant operators said they expect economic conditions to improve in six months, down from 30 percent who reported similarly last month. Eighteen percent of operators said they expect economic conditions to worsen in the next six months, up slightly from 16 percent last month.
Along with a dampened outlook for sales and the economy, restaurant operators reported a pullback on capital spending plans for the months ahead. Fiftythree percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 59 percent who reported similarly last month.
Twenty-three percent of operators plan to increase staffing levels in six months (compared to the same period in the previous year), while 10 percent said they plan to cut positions. — WLJ