Saturday, July 31, 2010

Restaurant Index shows contraction in June

by Bill McBride on 7/31/2010 08:56:00 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.

Same store sales and customer traffic both declined in June (on a year-over-year basis). This is the third consecutive month of declines.

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): Industry Outlook Softened in June as the Restaurant Performance Index Declined for the Third Consecutive Month

As a result of a dampened outlook among restaurant operators, the National Restaurant Association's comprehensive index of restaurant activity declined for the third consecutive month in June. 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 99.5 in June, down 0.3 percent from May and the lowest index level since February.

In addition, the RPI stood below 100 for the second consecutive month, which signifies contraction in the index of key industry indicators.
...
Restaurant operators reported a net decline in same-store sales for the third consecutive month in June, though the results were a modest improvement from the May performance.
...
Restaurant operators also reported a net decline in customer traffic levels in June.
...
Along with soft sales and traffic results, restaurant operators reported a dip in capital spending activity.
...
Restaurant operators are also not as optimistic about the direction of the overall economy. ... Restaurant operators’plans for capital expenditures fell to a six-month low this month.
emphasis added
Restaurants are a discretionary expense, and this contraction could be because of the sluggish recovery or might suggest further weakness in consumer spending in the months ahead.