In This Section:
Restaurant Traffic Posts Gains For Last Quarter And 2004
NRA Performance Index Jumps in December
Growth Of Key Macro-Economic Indicators Mixed
Fed Bumps Short-Term Rates Again
This issue's Regulatory Report Sponsor: APW Wyott Innovations | Industry ReportSponsor: Salvajor Co.
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Restaurant Traffic Posts Gains For Last Quarter And 2004
Traffic at U.S. restaurants grew 1.1% in the quarter ending in November, according to data from NPD Foodworld’s CREST study. The quarter marks the fifth straight quarter of traffic gains and helped overall traffic expand 1.3% for the year ending in November. The gains follow declines of 0.8% in 2003 and 0.2% in ’02.
The traffic gains, combined with modest increases in check averages, led to dollar growth of 3.3% for the year ending November ’04. This is the strongest growth since '01.
All the growth in traffic continues to be generated by the largest chains. For the year, large chains posted 4% traffic growth while small chains were off 1% and independents off 2%. The largest chains have seen their share of total traffic rise by three points during the past two years. Same store sales for the largest chains have gained a remarkable 8% during the same period.
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NRA Performance Index Jumps in December
Driven by big gains in customer traffic and same-store sales, the National Restaurant Association’s Restaurant Performance Index rose 1.7 points in December, matching the Index high achieved February 2004. The Current Situation Index jumped a robust 3.1 points while the Expectations Index posted a more modest 0.4 point advance.
"Nearly two-thirds of restaurant operators reported same-store sales gains in December, the highest level in 10 months," said NRA Senior V.P. of Research and Information Services Hudson Riehle. The same-stores sale and traffic components of the Current Situation Index rose 4.6 points and 5.5 points respectively.
Strong sales didn’t generate strong capital purchases, however. The Capital Expenditure Index of the Current Situation reading managed only a 0.1 point gain. The next-six-month capital outlook, part of the Expectations Index, rose a stronger 1.4 points.
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Growth Of Key Macro-Economic Indicators Mixed
Countering the positive foodservice industry news, both job growth and consumer sentiment came in lower than expected last Friday. New jobs grew a modest 146,000 in January, according to U.S. Department of Labor data, less than the 200,000 many economists had expected. The unemployment rate fell to 5.2% but only because workforce participation dropped to its lowest level, 65.8%, since 1988.
In addition, the government lowered earlier estimates of job growth in both November and December. Service sector jobs grew in January, while manufacturing and construction jobs fell.
Consumer sentiment and expectations posted declines in January, according the University of Michigan Surveys of Consumers. The Sentiment Index dropped back to 95.5 from 97.1 in December. The Expectations Index fell a more substantial 5.2 points to 85.7. But Surveys Director Rich Curtin characterized the changes as "insignificant" and added most consumers expect good times for the economy as a whole.
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Fed Bumps Short-Term Rates Again
The Federal Reserve Bank added another quarter point to the Federal-funds and discount rates last week, as widely expected. The increase was the sixth quarter-point bump since June 2004. Most commercial banks followed by raising the prime rate to 5.5%.
In making the announced, the Fed commented on an environment of moderate economic growth and "well-contained" inflation. Most economists expect the Fed to continue to raise rates throughout ’05, reaching a Federal-funds level of 3.5% by year’s end.
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