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“Although the RPI remained below 100 for the 17th consecutive month, which signals contraction, there are clear signs of improvement,” says Hudson Riehle, senior vice president of Research and Information Services for the Association. “Restaurant operators reported a positive six-month economic outlook for the first time in 18 months, and capital spending plans rose to a nine-month high.”
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 RPI consists of two components--the Current Situation Index and the Expectations Index. (Follow this link to view this month's report.)
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 Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 96.1 in March--down 0.4 percent from February and the first decline in three months. In addition, March represented the 19th consecutive month below 100, which signifies contraction in the current situation indicators.
Due in part to Easter falling in April rather than March this year, restaurant operators reported negative same-store sales for the 10th consecutive month in March. Twenty-four percent of restaurant operators reported a same-store sales gain between March 2008 and March 2009, down from 29 percent who reported a sales gain in February. Sixty-three percent of operators reported a same-store sales decline in March, up from 56 who reported negative sales in February.
Restaurant operators also reported negative customer traffic levels for the 19th consecutive month in March. Twenty percent of restaurant operators reported an increase in customer traffic between March 2008 and March 2009, compared to 22 percent who reported similarly in February. Sixty-three percent of operators reported a traffic decline in March, up from 59 percent who reported similarly in February.
Capital spending activity in the restaurant industry held relatively steady in recent months. Thirty-five percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, roughly on par with the levels reported by operators in the previous three months.
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 99.4 in March--up a solid 0.9 percent from February and its fourth consecutive monthly gain. Although the Expectations Index remained below 100 for the 17th consecutive month, it rose to its strongest level in 14 months.
The growth in the Expectations Index was buoyed by restaurant operators’ outlook for the economy. In fact, for the first time in 18 months, a higher proportion of restaurant operators said they expect the economy to improve in six months, as compared to the percent who expect economic conditions to worsen. Thirty percent of restaurant operators said they expect economic conditions to improve in six months, up from 22 percent who reported similarly last month and the highest level in 21 months. In comparison, only 21 percent of operators expect economic conditions to worsen in six months, down sharply from 36 percent last month.
Although their economic outlook improved, restaurant operators remain somewhat uncertain about sales growth in coming months. Thirty percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 25 percent who reported similarly last month. Thirty-eight 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, down slightly from 41 percent who reported similarly last month.
As the outlook for the economy improved, so too did operators’ plans for capital expenditure activity in the months ahead. Forty-four percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, the highest level since July 2008.
While the RPI is released on the last business day of each month, 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. Follow Restaurant TrendMapper on Twitter @trendmapper.