Friday, January 29, 2010

Restaurant Index Improves in December

by Bill McBride on 1/29/2010 01:24:00 PM

Note: This index is based on year-over-year performance, and the headline index might be slow to recognize a pickup in business.

Restaurant Performance Index Click on graph for larger image in new window.

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

Note: Any reading below 100 shows contraction for this index.

This is the highest level in almost two years, but the current situation index still suggests contraction in the restaurant industry.

From the National Restaurant Association (NRA): December Restaurant Performance Index Rose to Highest Level in Nearly Two Years

[T]he Association’s Restaurant Performance Index (RPI) ... stood at 98.7 in December, up 0.9 percent from November and its strongest level in nearly two years.

“The RPI’s strong gain in December was the result of broad-based improvements among several index components,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the National Restaurant Association. “Although restaurant operators continued to report a net decline in same-store sales and customer traffic, both registered their strongest performances since the summer of 2008.”

“Along with a solid improvement among the current situation indicators, restaurant operators are increasingly optimistic about industry growth in the months ahead,” Riehle added. “More than a third of restaurant operators expect to their sales to improve in six months, the highest level in more than two years.”

... The full report is available online. ...

... Index values above 100 indicate that key industry indicators are in a period of expansion, and index values below 100 represent a period of contraction for key industry indicators. Despite the solid improvement in December, the RPI remained below 100 for the 26th consecutive month.

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 97.3 in December – up a strong 1.4 percent from November and its highest level since August 2008. However, December still represented the 28th consecutive month below 100, which signifies contraction in the current situation indicators.
...
Restaurant operators also reported an improving customer traffic performance in December. Thirty percent of restaurant operators reported an increase in customer traffic between December 2008 and December 2009, up from just 21 percent who reported higher customer traffic in November. Forty-seven percent of operators reported a traffic decline in December, down from 62 percent who reported lower traffic in November.

Although restaurant operators reported stronger sales and traffic results in December, capital spending activity continued to drop off. ...
emphasis added