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Restaurant Performance Index Drops Into Contraction Territory

October 03, 2016, 07:00 AM
Filed Under: Restaurant

Due in large part to declines in both same-store sales and customer traffic, the National Restaurant Association’s Restaurant Performance Index (RPI) fell below 100 in August. The RPI stood at 99.6, down 1.0 percent from a level of 100.6 in July.

“Broad-based declines in the current situation indicators caused the RPI to fall below 100 for the first time in eight months,” said Hudson Riehle, senior vice president of research for the National Restaurant Association. “Restaurant operators reported soft sales and traffic in August, along with corresponding dips in the labor indicators. While the Expectations component of the index remains in expansion territory, it too has trended downward in the past several 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. 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 stood at 98.6 in August, down 1.9 percent from a level of 100.4 in July. The August reading represented the lowest value since February 2013. After three consecutive months of mixed results, same-store sales reports took a downward turn. Only 30 percent of restaurant operators reported a same-store sales increase between August 2015 and August 2016, while 53 percent reported a sales decline.

Similarly, operators reported a net decline in customer traffic. Only 21 percent reported an increase in customer traffic between August 2015 and August 2016, while 59 percent reported a traffic decline. August represented the fourth consecutive month in which restaurant operators reported a net decline in customer traffic.

Despite the these softer results, operators continued to report positive capital spending activity; 56 percent of restaurant operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months.

The Expectations Index stood at 100.6 in August, down slightly from a level of 100.8 in July. Along with softer sales results, restaurant operators’ outlook for future business also dampened. Thirty-three percent expect to have higher sales in six months, while 18 percent expect their sales to be lower. In addition, while only 17 percent of restaurateurs said they expect overall economic conditions to improve in six months, 62 percent still plan for capital expenditures six months out.

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