Despite higher sales, restaurant operators' optimism fading

Due to a softer outlook among restaurant operators for sales growth and the economy, the National Restaurant Association's Restaurant Performance Index declined for the third consecutive month.

The RPI — a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry — stood at 100.5 in August, down 0.2 percent from July's level of 100.7. Despite the recent declines, the RPI remained above 100 for the sixth consecutive month, which signifies expansion in the index of key industry indicators.

"The August decline in the RPI was due almost entirely to a dip in the expectations indicators, with restaurant operators becoming less bullish about sales growth and the economy in the months ahead," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the NRA. "In contrast, operators reported positive same-store sales and customer traffic levels in August, and a majority of operators reported capital expenditures for the fourth consecutive month."

The Index consists of two components — the Current Situation Index and the Expectations Index.

Current Situation

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.7 in August — up 0.6 percent from July and the first increase in three months. In addition, the Current Situation Index stood above 100 for the fifth consecutive month, which signifies expansion in the current situation indicators.

A majority of restaurant operators reported positive same-store sales in August, and the overall results were an improvement over July's performance. Fifty-three percent reported a same-store sales gain between August 2012 and August 2013, up from 44 percent who reported higher sales in July. In comparison, 33 percent reported a decline in same-store sales in August, down slightly from 36 percent in July.

Operators also reported stronger customer traffic levels in August: 45 percent reported higher customer traffic levels between August 2012 and August 2013, up from 35 percent who reported a traffic gain in July. Meanwhile, 38 percent reported a decline in customer traffic in August, down from 43 percent in July.

Respondents continued to report positive capital spending levels: 53 percent said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the fourth consecutive month in which a majority reported expenditures.

Expectations Index

The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators, stood at 100.4 in August — down 0.9 percent from July and the lowest level in eight months. Although an Expectations Index above 100 continues to suggest that operators are generally positive about business conditions in the months ahead, their optimism is somewhat dampened compared to recent months.

Thirty-six percent expect to have higher sales in six months (compared to the same period in the previous year), down slightly from 37 percent last month and the lowest level in 10 months. Meanwhile, 16 percent expect their sales volume in six months to be lower than it was during the same period in the previous year, up from 9 percent last month and the highest level in seven months.

Operators are also less bullish about the economy: 23 percent said they expect economic conditions to improve in six months, unchanged from last month. However, 22 percent said they expect economic conditions to worsen in the next six months, up from 18 percent last month and the highest level in eight months.

Also, fewer operators are reporting plans for capital expenditures: 45 percent plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 53 percent who reported similarly last month.