Driven by improvements in the current situation indicators, the National Restaurant Association’s Restaurant Performance Index (RPI) registered a moderate increase in May. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.9 in May, up 0.6 percent from a level of 100.3 in April. The May increase in the RPI was due largely to stronger readings in the current situation indicators. Although restaurant operators continued to report mixed same-store sales and customer traffic, the results were an improvement over April’s levels.

At the same time, restaurant operators’ six-month outlook for sales growth and the economy softened somewhat from recent months. 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 below 100 represent a period of contraction for key industry indicators.

The Restaurant Performance Index consists of two components –the Current Situation Index and the Expectations Index. The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.2 in May – up 1.0 percent from a level of 99.1 in April. Despite the increase, May represented only the second time in the last eight months with a reading above 100, which signifies expansion in the current situation indicators.

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 101.7 in May – up 0.2 percent from a level of 101.5 in April.

Although the Expectations Index remained comfortably above 100 in expansion territory, restaurant operators were somewhat less optimistic than they were during the first three months of 2017.

Restaurant operators continued to report mixed same-store sales in May, though results were somewhat stronger than April. Thirty-six percent of restaurant operators reported a same-store sales increase between May 2016 and May 2017, up slightly from 34 percent of operators who reported higher same-store sales in April. Forty-one percent of operators said their sales declined in May, down from 47 percent who reported similarly in April.

Restaurant operators also reported somewhat improved customer traffic results in May. Thirty-three percent of restaurant operators reported an increase in customer traffic between May 2016 and May 2017, up from 26 percent of operators who reported higher traffic in April. Forty-seven percent of operators reported a decline in customer traffic in May, down from 52 percent in April.

Despite the continued mixed sales and customer traffic results, capital spending activity remained positive. Sixty-two percent of restaurant operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, which represented the third consecutive month with a reading above 60 percent.

Although restaurant operators are still generally positive about the business environment in the months ahead, their optimism waned somewhat in recent months. Thirty-three percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 37 percent last month and the lowest level since December. Fifteen 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, while 52 percent of operators think their sales will remain about the same. Similarly, restaurant operators’ outlook for the economy is less optimistic than it was a few months ago. Twenty-seven percent of restaurant operators said they expect economic conditions to improve in six months, while 19 percent said they expect economic conditions to worsen. This represented the weakest outlook since October, when operators reported a net negative reading of 15 percentage points.

Even with the mixed outlook, more restaurant operators are planning for capital expenditures in the coming months. Sixty-four percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 56 percent of operators who reported similarly last month.

For more information about the Restaurant Performance Index, visit the national Restaurant Association’s website at http://www.restaurant.org/News-Research/Research/RPI.

Source: National Restaurant Association