RPI Wanes A Bit, To 100.3, But Mixed Results Complicate Big Picture

Softer sales and a dampened outlook among operators led to a decline for the second consecutive month in the National Restaurant Association’s Restaurant Performance Index, but even as restaurant performance and operators’ expectation continued to fall, the overall numbers still attest to expansion in the industry.

The RPI stood at 100.3 in June, down 0.3 point from May’s reading.

A value above 100 indicates expansion for both the Index and all its components, including the Current Situation Index, measuring current trends, and the Expectations Index, measuring restaurant operators’ six-month outlook.

The Index has swung back and forth since it ended a 33-month run in positive territory last December, when it dipped to 99.7. In June, the Current Situation Index stood at 99.9—down 0.3 from a level of 100.2 in May. It was the second consecutive decline in that index, and marks the first time in five months that it dipped below the 100 level, which indicates contraction in key indicators.

The Expectations Index stood at 100.7 in June – down 0.4 percent from its May level. While the Expectations Index remained above 100 in expansion territory, the June reading represented its lowest level in six months.

“The uneven trend that the RPI followed during the first half of 2016 was due in large part to choppy same-store sales and customer traffic results,” says Hudson Riehle, the NRA’s senior v.p.-research. “This uncertainly likely contributed to the Expectations Index dipping to a six-month low in June. However, it’s hard to draw definitive conclusions in either direction right at this point, because the indicators continue to send mixed signals,” Riehle added.

Indeed, for the second consecutive month, restaurant operators reported a net decline in same-store sales and customer traffic. Thirty-eight percent reported a same-store sales gain between June 2015 and June 2016, while 43% reported a same-store sales decline. Thirty-three percent of operators reported an increase in customer traffic between June 2015 and June 2016; 49% saw their traffic decline.

Despite the dips in sales and traffic, restaurant operators’ capital spending remains at positive levels. Fifty-five percent said they made a capital expenditure for equipment, expansion or remodeling during the last three months, marking the 21st consecutive month in which a majority of restaurant operators said they made such a purchase. More equipment shopping, expansion or remodeling is planned by 57% of operators, down from 62% of operators who reported similarly in May.

Operators are somewhat less optimistic about sales growth in the months ahead. A third expect to have higher sales in six months (compared to the same period in the previous year), and 18% expect their sales volume to be lower than it was during the same period in the previous year, which is the highest monthly reading in nearly four years.

Restaurant operators also continue to have a dampened outlook for the overall economy and their outlook for future business conditions remains mixed. The NRA’s complete RPI can be found at restaurant.org.”””

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