June Restaurant Performance Index Shows Improved Current Conditions But Softer Outlook

) Bolstered by stronger same-store sales and customer traffic levels, the National Restaurant Association's Restaurant Performance Index (RPI) stood above 100 for the eighth consecutive month in June. The RPI - a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry - stood at 101.4 in June, unchanged from May's level. June represented the eighth consecutive month that the RPI remained above 100, which signifies expansion in the index of key industry indicators.

"The latest Restaurant Performance Index reflects improvements in each of the four current situation indicators in June," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. "Restaurant operators reported positive same-store sales and customer traffic, while their capital spending activity advanced for the second consecutive month."

"However, although the overall current operating environment remains positive, operators have definitely tempered their expectations for the future. Each of the four expectations indicators softened in June, including restaurant operators' least positive economic outlook in eight months. Still, market conditions are substantially better than two and three years ago," Riehle added.

Watch a video of Riehle providing commentary on the June RPI.

The Restaurant Performance Index 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 101.5 in June - up 0.7 percent from May and the strongest level in three months. In addition, the Current Situation Index stood above 100 for the eighth consecutive month, which signifies expansion in the current situation indicators.

Restaurant operators reported positive same-store sales for the 13th consecutive month in June. Sixty-one percent of restaurant operators reported a same-store sales gain between June 2011 and June 2012, unchanged from the proportion who reported a sales gain in May. Meanwhile, 24 percent of operators reported lower same-store sales in June, down from 28 percent in May.

Restaurant operators reported stronger customer traffic levels in June. Fifty percent of restaurant operators reported higher customer traffic levels between June 2011 and June 2012, up from 42 percent who reported positive traffic in May. In comparison, 29 percent of operators reported lower customer traffic levels in June, down from 39 percent in May.

Restaurant operators reported an uptick in capital spending for the second consecutive month. Forty-eight percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, up slightly from 46 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 101.3 in June - down 0.7 percent from May and the third consecutive monthly decline. Although June marked the tenth consecutive month that the Expectations Index stood above 100, it also represented the weakest level in seven months.

Restaurant operators are generally optimistic that their sales levels will improve in the months ahead. Fifty percent of re