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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 fourth consecutive month. The RPI—a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry—stood at 100.2 in September, down 0.3 percent from a level of 100.5 in August. Despite the recent declines, the RPI remained above 100 for the seventh consecutive month, which signifies expansion in the index of key industry indicators.
“The RPI’s September decline was due in large part to softer same-store sales and customer traffic readings, which were down from stronger levels in August,” says Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association.
“In addition, restaurant operators’ confidence in the economy continued to deteriorate, which was likely due to the fact that the government shutdown and debt ceiling debates occurred during the midst of the survey’s October fielding period,” Riehle adds.
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 99.9 in September, down 0.7 percent from a level of 100.7 in August. September marked the first time in six months that the Current Situation Index fell below 100, which represents contraction in the current situation indicators.
Restaurant operators reported softer same-store sales results in September. Forty-one percent of restaurant operators reported a same-store sales gain between September 2012 and September 2013, down from 53 percent who reported higher sales in August. In comparison, 40 percent of operators reported a decline in same-store sales in September, up from 33 percent in August.
Restaurant operators also reported a dip in customer traffic levels in September. Thirty-three percent of restaurant operators reported higher customer traffic levels between September 2012 and September 2013, down from 45 percent who reported a traffic gain in August. Meanwhile, 44 percent of operators reported a decline in customer traffic in September, up from 38 percent in August.
Although sales and traffic levels softened, restaurant operators continued to report positive capital spending levels. Fifty-seven percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the fifth 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 100.5 in September, up slightly from a level of 100.4 in August. Although September represented the 11th consecutive month in which the Expectations Index stood above 100, restaurant operators are not as bullish as they were during the first half of the year.
Restaurant operators’ outlook for sales growth in the months ahead remains relatively cautious. Thirty-four percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down slightly from 36 percent last month and the lowest level in 11 months. Meanwhile, 13 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, compared to 16 percent last month.
Restaurant operators are also less optimistic about the direction of the economy. Only 19 percent of restaurant operators said they expect economic conditions to improve in six months, down from 23 percent last month. Meanwhile, 28 percent of operators said they expect economic conditions to worsen in the next six months, up from 22 percent last month and the highest level in nine months.
Despite an uncertain outlook for the economy, a majority of restaurant operators are planning for capital expenditures in the months ahead. Fifty-two percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 45 percent who reported similarly last month.
The RPI 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 full report and video summary are available online at Restaurant.org/RPI.
The RPI is released on the last business day of each month, and a more detailed data and analysis can be found on Restaurant TrendMapper, the association’s subscription-based web site that provides detailed analysis of restaurant industry trends.