Capital Spending Measures Rise As NRA Performance Index Treads Water

The two capital expenditure measures that are part of the National Restaurant Association’s Restaurant Performance Index rose in July, even while the overall index fell slightly. The worrisome issue is the continuing decline in operators’ expectations about business over the next six months.

The overall RPI fell 0.1 point to 99.4, the fourth-consecutive monthly decline, and the third month the index has been below the 100 tipping point that signals industry contraction as opposed to expansion. The index nosed above 100 in March and April for the first time since late 2007.

The four-component Current Situation Index was flat. Traffic and labor components fell 0.2 point, while the same-store sales measure was flat. The indicator for operators that made a capital expenditure during the past three months rose 0.4 point.

The Expectations Index, which also has four components, fell 0.1 point. The measures for same-store sales during the next six months and the outlook for business conditions during the next six months fell 0.2 point and 0.1 point respectively. Since April, the percentage of operators surveyed that believe business conditions will improve fell from 46% to 26% while those expecting worse conditions rose from 12% to 21%. The indicator for operators planning a capital purchase during the next six months rose 0.3 point.

While both cap-ex measures rose, they are still running well below the levels of two or three years ago. In the July survey, 45% of operators said they made a capital purchase in the past three months, while 43% said they planned to make such a purchase in the next six months. Those numbers were running in the 60s in ’07.