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Uncertainty over future business conditions dampens RPI

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August 31, 2012

Uncertainty over future business conditions dampens RPI

As a result of softer customer traffic and a dampened outlook among restaurant operators, the Restaurant Performance Index (RPI) fell to its lowest level in nine months. The RPI stood at 100.2 in July, down 1.1 percent from June and the lowest mark since a reading of 100.0 in October. However, July still represented the ninth consecutive month that the RPI stood above 100, signifying expansion in the index of key industry indicators.

“Although restaurant operators reported positive same-store sales for the 14th consecutive month in July, their economic outlook for the months ahead continued to soften,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Only 22 percent of restaurant operators expect economic conditions to improve in the next six months, the lowest level in 10 months.”

“Despite their uncertainty, roughly one-half of restaurant operators still plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, which is a positive indicator for both the industry’s supply chain and the overall economy,” Riehle added.

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.

Although restaurant operators reported positive same-store sales for the 14th straight month in July, results were much softer than recent months. Fifty-three percent of restaurant operators reported a same-store sales gain between July 2011 and July 2012, down from 61 percent who reported positive sales in June. In comparison, 36 percent of operators reported lower same-store sales in July, up sharply from 24 percent in June.

While sales remained positive overall, restaurant operators reported a net decline in customer traffic levels in July. Thirty-five percent of restaurant operators reported higher customer traffic levels between July 2011 and July 2012, down from 50 percent who reported positive traffic in June. Meanwhile, 46 percent of operators reported lower customer traffic levels in July, up from 29 percent in June.

The Expectations Index stood at 100.7 in July ? down 0.6 percent from June and the fourth consecutive monthly decline. Although July marked the 11th consecutive month that the Expectations Index stood above 100, it also represented the weakest level in nine months.

Restaurant operators are noticeably less optimistic about the direction of the overall economy. Only 22 percent of restaurant operators said they expect economic conditions to improve in six months, down from 28 percent last month and the lowest level in 10 months. Meanwhile, 22 percent of operators said they expect economic conditions to worsen in the next six months, while 56 percent think conditions will stay about the same.

SOURCE: National Restaurant Association

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