WASHINGTON D.C. — The outlook for the restaurant industry softened somewhat in August, as the National Restaurant Association's comprehensive index of restaurant activity registered a modest decline.
 
According to a news release, NRA's Restaurant Performance Index — a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry — stood at 100.7 in August, down 0.2 percent from its July level. Despite the decline, the RPI remained above 100 for the 40th consecutive month, which represents expansion in the association's composite index of eight key industry indicators.
 
"The fundamental trends in the Restaurant Performance Index remained solid overall, with positive same-store sales and traffic levels despite a softer economy and strong gas prices," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "However, operators' six-month outlook is definitely more restrained compared to earlier this year."
 
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 here to view this month's Index report.
 
The August drop in the Restaurant Performance Index was the result of modest declines in both the Current Situation and Expectations Indices. The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.3 in August, down 0.1 percent from July and its lowest level in 11 months.
 
Although gas prices remained at elevated levels throughout much of August, restaurant operators reported an overall net positive same-store sales performance for the 37th consecutive month. Fifty-one percent of restaurant operators reported a same-store sales gain between August 2005 and August 2006, while 31 percent of operators registered a sales decline. In July, 46 percent of operators registered a same-store sales gain, while 36 percent reported a decline.
 
Similar to the July results, August same-store sales varied within industry segments. A solid majority of quick-service operators reported a same-store sales gain in August, while sales results were somewhat weaker in the full-service segment.
 
Customer traffic was modestly positive in August. Thirty-eight percent of restaurant operators reported an increase in customer traffic between August 2005 and August 2006, while 36 percent of operators reported a traffic decline. Twenty-six percent of operators reported no change in customer traffic between August 2005 and August 2006.
 
Restaurant operators reported a slowdown in capital spending relative to recent months. Forty-eight percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the lowest level in eight months.
 
The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 100.9 in August, down 0.3 percent from July and its lowest level in 11 months.
 
Although the Expectations Index registered declines in four of the last five months, it still remained above 100, which indicates that operators remain optimistic about growth in the next several months. Forty-three percent of restaurant operators expect their sales volume in six months to be higher than it was during the same period in the previous year, while 16 percent of operators expect to have lower sales in six months. Forty-one percent of operators expect their sales to remain about the same.
 
In contrast to a relatively optimistic sales outlook, restaurant operators are not as upbeat about the direction of the overall economy. Just 26 percent of operators expect economic conditions to be stronger in six months, while 23 percent of operators expect the economy to worsen in six months. Fifty-one percent of operators expect economic conditions to remain about the same.
 
Restaurant operators also indicated that they are planning to cut back on capital expenditures in the coming months. Fifty-two percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 65 percent who reported similarly in February.

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