Uncertain economy dampens industry outlook

Sept. 29, 2008
WASHINGTON, D.C. -- Restaurant industry performance remained soft in August, as the National Restaurant Association's comprehensive index of restaurant activity stood below 100 for the 10th consecutive month. The Association's Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 98.3 in August, up 0.1 percent from its July level. 
"The recent lack of change in the Restaurant Performance Index reflects the wait-and-see sentiment in the financial markets and overall economy," said Hudson Riehle, senior vice president of research and information services for the NRA. "Restaurant operators reported negative same-store sales for the eighth time in the last 10 months, and their outlook for sales growth in the months ahead remains uncertain."
A record 31 percent of restaurant operators said the economy is the No-1 challenge facing their business, Riehle said, while 22 percent identified food costs as their top challenge.
The RPI 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 RPI consists of two components – the Current Situation Index and the Expectations Index.
The RPI is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values under 100 represent a period of contraction for key industry indicators. 
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 97.8 in August – up 0.2 percent from July and its first gain in three months. Despite the modest improvement, August marked the 12th consecutive month below 100, which signifies contraction in the current situation component. 
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 98.8 in August – down 0.1 percent from July's level. In addition, August represented the 10th consecutive month in which the Expectations Index stood below 100. 

Topics: Associations , Operations Management

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