Buoyed by stronger same-store sales and customer traffic levels, the National Restaurant Association's Restaurant Performance Index hit a 14-month high in May.
The RPI — a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry — stood at 101.8 in May, up 0.9 percent from April and the third consecutive monthly gain. May also represented the third straight month that the RPI surpassed the 100 level, which signifies expansion in the index of key industry indicators.
"The May increase in the Restaurant Performance Index was driven by broad-based gains in the current situation indicators, most notably positive same-store sales and customer traffic results," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the NRA. "In addition, restaurant operators remain optimistic about continued sales growth and a majority plan to make a capital expenditure in the next six months."
The RPI consists of two components, the Current Situation Index and the Expectations Index.
Current Situation Index
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 101.6 in May — up 1.6 percent from a level of 100.1 in April. May represented the strongest Current Situation Index reading since March 2012, and signifies expansion in the current situation indicators.
A majority of operators reported higher same-store sales in May, and the overall results were a solid improvement over the April performance. Sixty-three percent reported a same-store sales gain between May 2012 and May 2013, up from 49 percent who reported higher sales in April. Meanwhile, 23 percent of operators reported a decline in same-store sales in May, down from 33 percent in April.
Respondents also reported a net gain in customer traffic levels in May. Forty-seven percent of operators reported higher customer traffic levels between May 2012 and May 2013, while 30 percent of operators said their traffic declined. In April, 36 percent reported an increase in customer traffic, while 40 percent reported lower traffic levels.
Along with the positive sales and traffic results, restaurant operators reported an increase in capital spending activity. Fifty-two percent of operators saying they made a capital expenditure for equipment, expansion or remodeling during the last three months, up from 47 percent who reported similarly last month.
The Expectations Index, which measures restaurant operators' six-month outlook for the aforementioned four industry indicators, stood at 102.0 in May — the strongest level in 12 months. Each of the four expectations indicators stood above 100 for the fifth consecutive month, which indicates broad-based optimism for business conditions in the coming months.
Operators are increasingly optimistic about their sales prospects in the months ahead. Forty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 41 percent last month and the highest level in nearly a year. Conversely, 8 percent expect their sales volume in six months to be lower than it was during the same period in the previous year, the lowest level in 12 months.
Restaurant operators are not as bullish about the direction of the overall economy. Thirty percent said they expect economic conditions to improve in six months, essentially unchanged from 28 percent who reported similarly last month. Fifteen percent said they expect economic conditions to worsen in the next six months, compared to 13 percent last month.
Operators continue to plan for capital spending in the months ahead. Fifty-seven percent plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down slightly from 59 percent who reported similarly last month.
Finally, 21 percent of operators plan to increase staffing levels in six months (compared to the same period in the previous year), while 8 percent said they plan to cut positions.
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