NRA’s Performance Index Crashed In December

The National Restaurant Association’s Restaurant Performance Index took an unexpected nose-dive in the December survey. The index dropped 1.6 points and ended at 99.7, below the 100 level that separates expansion from contraction, not only in the overall Index, but in all its components. It was the first time the Index has fallen below 100 since February 2013, ending a 33-month run of expansion.

All eight indicators that make up the index fell a full point or more. The two capital spending components were off sharply, but both ended above the 100 level at 100.4, two of only three RPI indicators that remained above the tipping point.

One factor behind the decline was undoubtedly that restaurateurs got spooked by the sudden 10% decline of the major stock indices in the U.S. and worldwide. NRA conducted the survey in January. But the bear market is not the only thing worrying operators, NRA Senior V.P. of Research Hudson Riehle told FER Fortnightly.

“Elements of the economy remained uncertain toward the end of 2015, which is reflected in the RPI and restaurant operators’ less optimistic outlook,” said Riehle. “Restaurateurs are facing a range of headwinds in the operating environment, and while some signs are trending in a positive direction, several others remain less promising. The sustained period of moderate economic growth and its regional variations in particular are taking a toll on operators’ psyches.”

For example, while operators have benefited from decreases in food prices, they are very worried about labor costs. And now that many have actually seen sales and traffic increases thanks to strong jobs growth and the energy price declines during the past 18 months, they are still worried that the recovery is tenuous. Slower end-of-the year growth, compounded by the stock market crash, appears to be making them very nervous, as the RPI results are signaling.

Still, there is one other slightly bright note in the survey results: The four-component Expectations Index, though it dropped 1.6 points, remained just above the tipping point at 100.1. Among Expectation Index components, the six-month outlook for same-store sales fell 1.4 points to 101.5, the staffing outlook, which measures expectations for numbers of employees in six months, was off 1.5 points to 99.9 and the outlook for business conditions in six months fell 1.1 points to 98.8. It had fallen below 100 in the November survey.

In the Current Situation Index, the same-store sales and traffic indicators were off 1.2 and 1.8 points respectively with the sales component ending at 99.9 and traffic at 98.3. Only two months ago, the same-store sales component stood at a robust 103.9. The labor indicator, which tracks employee counts and hours, fell 1.4 points to 98.9.

The cap-ex measure that tracks operator purchases during the past three months fell precipitously for the second consecutive month, down 1.9 points but remained above the expansion line at 100.4; a majority of those surveyed, 52%, reported a purchase. That number is down from a record 76% in October. The forward looking cap-ex indicator, which tracks intention to make a capital buy during the next six months, dropped 2.2 points to 100.4, with 52% also reporting plans to buy. That is down from 63% in the November survey.

As we move further into the first quarter of 2016, we’ll have to wait and see if the positive drivers of foodservice spending—still falling gas and food prices, good consumer confidence levels—offset operator worries.

The complete NRA RPI, and video commentary from NRA’s Riehle is available at “””

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