Wednesday, June 30, 2010

Restaurant Index "Softened" in May

by Bill McBride on 6/30/2010 11:57:00 AM

This is one of several industry specific indexes I track each month.

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

For the second consecutive month, same store sales and customer traffic both declined in May (year-over-year).

This has taken a toll on the positive outlook in the "expectations index" and the overall index showed contraction in May.

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

Note: Any reading above 100 shows expansion for this index.

From the National Restaurant Association (NRA): Restaurant Industry Outlook Softened in May as Restaurant Performance Index Fell Below 100

The outlook for the restaurant industry softened in May, as the National Restaurant Association’s comprehensive index of restaurant activity fell below 100 for the first time in three months. 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 99.7 in May, down 0.7 percent from April’s level of 100.4.
...
Restaurant operators reported a net decline in same-store sales for the second consecutive month in May.
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Restaurant operators also reported softer customer traffic results in May.
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Although sales and traffic results softened in May, restaurant operators reported an uptick in capital spending activity.
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Although restaurant operators remain optimistic about sales growth in the months ahead, their optimism slipped somewhat in recent months.
emphasis added
Restaurants are a discretionary expense, and they tend to be 'first in, last out' of a recession for consumer spending (as opposed to housing that is usually first in and first out). Since restaurants both lead and lag recessions, this contraction could be because of the sluggish recovery or might suggest further weakness in consumer spending in the months ahead.