INDUSTRY ISSUES | Cautious Optimism from NRA

The outlook for the restaurant industry became more positive following the National Restaurant Association’s (NRA) report that restaurant activity registered its fourth consecutive monthly gain. A monthly composite index that tracks the industry, NRA’s Restaurant Performance Index (RPI) was up 0.8 percent in April to reach 98.6 percent.

The RPI is based on the responses to NRA’s monthly Restaurant Industry Tracking Survey of restaurant operators nationwide, which inquires about 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 recent growth in the RPI was driven by the Expectations component, which rose above 100 in April for the first time in 18 months, a level which indicates expansion,” said Hudson Riehle, senior vice president of Research and Information Services at NRA.  “Although the RPI’s Current Situation indicators are still in a period of contraction, the solid improvement in the forward-looking indicators suggests that the end of the industry’s downturn may be in sight.”

Although sales and traffic levels remained soft — 60 percent of operators reported a traffic decline in April — restaurant operators reported an uptick in capital spending activity. Forty-three percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the highest level in 10 months.

So what do all these numbers mean? Sounds like some optimism is creeping back into the industry, with operators seeing a light at the end of the recessionary tunnel. In fact, NRA reports that for the first time in 15 months, restaurant operators reported a positive six-month outlook for sales growth: 33 percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 30 percent last month and the highest level in 18 months.  Meanwhile, just 30 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 from 38 percent who reported similarly last month.

Restaurant operators also are more optimistic about the economy, with 37 percent saying they expect economic conditions to improve in six months, up from 30 percent who reported similarly last month and the highest level in three years. In comparison, only 16 percent of operators expect economic conditions to worsen in six months, down from 21 percent last month.

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