Food service operator economic optimism grows

by Keith Nunes
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WASHINGTON — The outlook for the restaurant industry grew more optimistic in April, as the National Restaurant Association’s (N.R.A.)index of restaurant activity registered its fourth consecutive monthly gain. The N.R.A.’S Restaurant Performance Index (R.P.I.) — a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry — stood at 98.6 in April, up 0.8% from March, its highest level in 11 months.

"The recent growth in the R.P.I. was driven by the expectations component, which rose above 100 in April for the first time in 18 months, a level which indicates expansion," said Hudson Riehle, senior vice-president of research and information services for the N.R.A. "Although the R.P.I.’s current situation indicators are still in a period of contraction, the solid improvement in the forward-looking indicators suggests that the end of the industry’s downturn may be in sight."

The current situation index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 97 in April -- up 0.9% from March and its highest level since August 2008. However, April represented the 20th consecutive month below 100, which continues to signify contraction in the current situation indicators.

Even though sales comparisons benefited from Easter falling in April this year, restaurant operators reported negative same-store sales for the 11th consecutive month in April. Twenty-six per cent of restaurant operators reported a same-store sales gain between April 2008 and April 2009, up slightly from 24% who reported a sales gain in March. Fifty-nine per cent of operators reported a same-store sales decline in April, down from 63% who reported negative sales in March.

Restaurant operators reported negative customer traffic levels for the 20th consecutive month in April. Twenty-three per cent of restaurant operators reported an increase in customer traffic between April 2008 and April 2009, up from 20% who reported similarly in March. Sixty per cent of operators reported a traffic decline in April, down from 63% who reported similarly in March.

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 100.2 in April -- up 0.8% from March and its fifth consecutive monthly increase. In addition, the Expectations Index crossed above the 100 level for the first time in 18 months, which signifies expansion in the forward-looking indicators.

Growth in the expectations index was driven by restaurant operators’ improving outlook for both sales and the economy. In fact, for the first time in 15 months, restaurant operators reported a positive six-month outlook for sales growth. Thirty-three per cent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 30% last month and the highest level in 18 months. Meanwhile, just 30% of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, down from 38% who reported similarly last month.

Restaurant operators also continue to grow more optimistic about the economy. Thirty-seven per cent said they expect economic conditions to improve in six months, up from 30% who reported similarly last month and the highest level in three years. In comparison, only 16% of operators expect economic conditions to worsen in six months, down from 21% last month.

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