Tuesday, August 31, 2010

Restaurant Index shows contraction in July

by Bill McBride on 8/31/2010 04:14:00 PM

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 July (on a year-over-year basis). This is the fourth 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): Restaurant Industry Outlook Remained Uncertain in July as Restaurant Performance Index Remains Essentially Flat

As a result of soft sales and traffic levels and a deteriorating outlook among restaurant operators, the National Restaurant Association’s comprehensive index of restaurant activity remained essentially flat in July. 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 99.4 in July, down 0.1 percent from June and its fourth consecutive decline. In addition, the RPI stood below 100 for the third consecutive month, which signifies contraction in the index of key industry indicators.
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Restaurant operators reported negative same-store sales for the fourth consecutive month in July, with the overall results similar to the June performance.
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Restaurant operators also reported a net decline in customer traffic levels in July.
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Restaurant operators have become less optimistic about their prospects for sales growth in recent months.
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.