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 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 100.8 in May - down 0.2 percent from April's level of 101.0. Despite the decline, the Current Situation Index remained above 100 for the seventh consecutive month, which signifies expansion in the current situation indicators.

Restaurant operators reported positive same-store sales for the 12th consecutive month in May, with sales results similar to their April performance. Sixty-one percent of restaurant operators reported a same-store sales gain between May 2011 and May 2012, up from 57 percent who reported a sales gain in April. Meanwhile, 28 percent of operators reported lower same-store sales in May, up from 25 percent who reported similarly in April.

While sales results remained positive, restaurant operators reported softer customer traffic results in May. Forty-two percent of restaurant operators reported higher customer traffic levels between May 2011 and May 2012, down from 46 percent who reported positive traffic in April. In comparison, 39 percent of operators reported lower customer traffic levels in May, up from 30 percent in April.

Restaurant operators reported a slight uptick in capital spending. Forty-six percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, up slightly from 44 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 102.0 in May - down slightly from April's level of 102.2. May represented the ninth consecutive month that the Expectations Index stood above 100, which signifies a positive outlook among restaurant operators for business conditions in the coming months.

Restaurant operators are generally optimistic that their sales levels will improve in the months ahead. Forty-eight percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down slightly from 52 percent who reported similarly last month. In comparison, only eight 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, unchanged from last month.

Restaurant operators are somewhat less bullish about the direction of the overall economy. Thirty-six percent of restaurant operators said they expect economic conditions to improve in six months, up slightly from 34 percent last month. However, 19 percent of operators said they expect economic conditions to worsen in the next six months, up from 10 percent last month and the highest proportion in seven months.

For the eighth consecutive month, restaurant operators reported positive expectations for staffing growth in the months ahead. Twenty percent of restaurant operators plan to increase staffing levels in six months (compared to the same period in the previous year), while only 8 percent said they expect to reduce staffing levels in six months.

Along with a positive sales outlook, restaurant operators continue to plan for capital spending in the coming months. Fifty-five percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 52 percent who reported similarly last month.

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 full report and a video summary are available online at http://www.restaurant.org/research/economy/rpi .

Source: National Restaurant Association