In a positive sign for the restaurant industry, the National Restaurant Association`s comprehensive index of restaurant activity soared to a record level in January…
In a positive sign for the restaurant industry, the National Restaurant Association`s comprehensive index of restaurant activity soared to a record level in January. The Association`s Restaurant Performance Index – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – jumped 1.0 percent above its already strong December level. The strong January increase followed a steady performance in December, and stood a half-point above its previous record set in October 2003.
The Restaurant Performance Index is based on the responses to the National Restaurant Association`s Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor and capital expenditures. The Index consists of two components – the Current Situation Index and the Expectations Index. (Click on the following link to view this month`s Index report: www.restaurant.org/pdfs/research/index/200401.pdf).
January`s record Index level was the result of broad-based growth across the Index components, said Hudson Riehle, senior vice president of Research and Information Services for the Association. Seven out of eight indicators registered gains in January, driven by solid improvements in same-store sales and customer traffic. In addition, the Index reflected a boost in plans for staffing levels and capital expenditures – positive developments for both the restaurant industry and the overall economy.
The January increase in the Restaurant Performance Index was driven by solid gains in both the current situation and expectations components of the Index. The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), gained 1.3 percent in January.
For just the second time in the 20-month history of the Restaurant Performance Index, a majority of operators reported an increase in same-store sales. Fifty-four percent of restaurant operators reported a same-store sales gain between January 2003 and January 2004 – up from 49 percent who reported a sales gain in December. In contrast, only 31 percent of operators reported a same-store sales decline between January 2003 and January 2004. January marked the sixth consecutive month of positive same-store sales.
Customer traffic results were also stronger in January. Forty-four percent of restaurant operators reported an increase in customer traffic between January 2003 and January 2004 – up from 38 percent who registered an increase in December. Only 35 percent of operators reported a traffic decline in January – down from 41 percent who reported similarly in December.
The Expectations Index, which measures restaurant operators` six-month outlook for four industry indicators, increased 0.7 percent in January. The January gain marked the seventh consecutive monthly increase in the Expectations Index, and bodes well for continued restaurant industry growth during the next several months.
In recent months, restaurant operators have grown increasingly optimistic about short-term sales growth in their establishments. More than two-thirds of restaurant operators (68 percent) expect to have higher sales in six months (compared to the same period in the previous year) – up from 62 percent last month and the strongest level on record. Meanwhile, only 9 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year.
Operators also remain confident in the direction of the overall economy. Sixty-three percent of restaurant operators expect economic conditions in six months to be better than they are now – matching the strong levels posted in the previous two months. Only 5 percent of restaurant operators expect economic conditions to worsen in six months.
In addition to their positive outlook for sales growth, restaurant operators are continuing to make plans for capital expenditures. Sixty-seven percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months – the strongest level on record.
While the Restaurant Performance Index is consistently released on the last business day of each month, more detailed data and analysis can be found on Restaurant TrendMapper (www.restaurant.org/trendmapper), the Association`s subscription-based Web site that provides real-time analysis of restaurant industry trends.
Restaurant Performance Index
June 2002 = 100
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