Due in large part to softer same-store sales and customer traffic levels, the National Restaurant Association’s Restaurant Performance Index (RPI) slipped below 100 in February.  The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 99.9 in February, down 0.8 percent from January’s five-month high.  February represented the fourth time in the last five months that the RPI stood below 100, which signifies contraction in the index of key industry indicators.
 
“The Restaurant Performance Index decline was due largely to softer sales and traffic results, which fell in February amid higher gas prices and the impact of the payroll tax hike,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association.  “In addition, sales and traffic comparisons were more difficult due to the extra day in February 2012 as a result of Leap Year.”
 
“Despite the sales and traffic declines in February, restaurant operators remain generally optimistic about business conditions in the months ahead, which suggests they feel the setbacks will be temporary,” Riehle added.

Capital spending activity also dipped along with the sales and traffic results.  Forty-eight percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, down from 52 percent who reported similarly last month.
 
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 101.4 in February – down slightly from January’s level of 101.6.  Each of the four expectations indicators stood above 100 for the second consecutive month, which suggests restaurant operators remain generally optimistic about business conditions in the months ahead.
 
Although restaurant operators’ outlook for sales growth remains positive, their expectations are slightly less bullish compared to last month.  Forty-one percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 46 percent last month.  Meanwhile, 14 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, compared to 17 percent last month.
 
Although restaurant operators have a net positive outlook for the overall economy for the second consecutive month, their confidence is tenuous.  Twenty-five percent of restaurant operators said they expect economic conditions to improve in six months, down from 30 percent who reported similarly last month.  Meanwhile, 20 percent of operators said they expect economic conditions to worsen in the next six months, unchanged from last month.
 
Restaurant operators continue to make plans for capital spending in the months ahead.  Fifty-seven percent of restaurant operators 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.