Friday, February 27, 2009

Restaurant Performance Index Rebounds Slightly

by Bill McBride on 2/27/2009 10:57:00 AM

From the National Restaurant Association (NRA): Restaurant Industry Outlook Improved Somewhat in January as Restaurant Performance Index Rebounded From December’s Record Low

The outlook for the restaurant industry improved somewhat in January, as the National Restaurant Association’s comprehensive index of restaurant activity bounced back from December’s record low. The Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 97.4 in January, up 1.0 percent from December’s record low level of 96.4.

“Despite the encouraging January gain, the RPI remained below 100 for the 15th consecutive month, which signifies contraction in the key industry indicators,” said Hudson Riehle, senior vice president of Research and Information Services for the Association. “Same-store sales and customer traffic remained negative in January, and only one out of four operators expect to have stronger sales in six months.”
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Restaurant operators reported negative customer traffic levels for the 17th consecutive month in January.
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Along with soft sales and traffic levels, capital spending activity remained dampened in recent months. Thirty-four percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, matching the proportion who reported similarly last month and tied for the lowest level on record.
emphasis added
Restaurant Performance Index Click on graph for larger image in new window.

Unfortunately the data for this index only goes back to 2002.

The index values above 100 indicate a period of expansion; index values below 100 indicate a period of contraction.

Based on this indicator, the restaurant industry has been contracting since November 2007. Also note the record low business investment by restaurant operators - this is happening in most industries, and is showing up as a significant decline in equipment and software investment in the GDP report (-28.8% annualized in the Q4 report!)