Stronger Sales, Traffic Bolster Restaurant Performance Index In August

Buoyed by stronger same-store sales and customer traffic levels, the National Restaurant Association's Restaurant Performance Index (RPI) posted a modest gain in August. The RPI - a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry - stood at 100.6 in August, up 0.4 percent from July and the first increase in five months. August represented the tenth consecutive month that the RPI stood above 100, which signifies continued expansion in the index of key industry indicators.

"Growth in the RPI was driven largely by improving same-store sales and customer traffic results in August," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. "Six out of 10 restaurant operators reported positive same-store sales in August, while customer traffic readings bounced back from July's net decline."

"In contrast, the Expectations Index remained dampened compared to recent stronger levels, with restaurant operators retaining a cautious outlook for sales growth and the economy in the months ahead," Riehle added.

Watch a video of Riehle providing commentary on the August 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 100.6 in August - up 0.8 percent from July's level of 99.8. After dipping below 100 in July for the first time in nine months, the August reading represents a return to expansion in the index of current situation indicators.

Restaurant operators reported positive same-store sales for the 15th consecutive month, with August results representing a solid improvement over the July performance. Sixty-one percent of restaurant operators reported a same-store sales gain between August 2011 and August 2012, up from 53 percent who reported positive sales in July. In comparison, 25 percent of operators reported lower same-store sales in August, down from 36 percent in July.

Restaurant operators also reported a net increase in customer traffic levels in August. Forty-seven percent of restaurant operators reported higher customer traffic levels between August 2011 and August 2012, up from 35 percent who reported positive traffic in July. In contrast, only 32 percent of operators reported lower customer traffic levels in August, down sharply from 46 percent in July.

Despite the uptick in sales and customer traffic, restaurant operators reported somewhat lower levels of capital spending. Forty-one percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, down 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 100.7 in August - unchanged from July's level. Although August marked the 12th consecutive month that the Expectations Index stood above 100, it remained nearly two index-points below the post-recession peak reached in March.

Restaurant operators remain generally optimistic that their sales levels will improve in the months ahead, as their sales outlook was essentially unchanged from last month. Fort