Restaurant Performance Index Fell to Lowest Level in 13 Months Amid Growing Operator Uncertainty

Restaurant Performance Index Fell to Lowest Level in 13 Months Amid Growing Operator Uncertainty
Less than one out of five restaurant operators expect economic conditions to improve in the next six months

( Washington, D.C.) Dampened by softer sales and traffic levels and continued uncertainty among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) declined for the second consecutive month in August. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 99.4 in August, down 0.3 percent from July. In addition, August marked the second consecutive month that the RPI stood below 100, the level above which signifies expansion in the index of key industry indicators.

“The August decline in the Restaurant Performance Index resulted from softening of both current situation and expectations indicators, as well as Hurricane Irene,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Although restaurant operators reported net positive same-store sales results in August, their six-month outlook for both sales growth and the economy continued to deteriorate.”

“It is important to note that the industry’s August performance is a substantial improvement over the 2008-2009 period, but overall, the near-term health of the restaurant industry will depend heavily on the economy’s ability to create jobs and bolster consumer confidence,” Riehle added.

Watch a video of Riehle providing an industry update, including the July RPI and other economic indicators, plus the Association's new summer dining research.

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, and index values below 100 represent a period of contraction for key industry indicators. The RPI 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 99.3 in August – down 0.5 percent from July and the second consecutive monthly decline.

Although restaurant operators reported net positive same-store sales in August, the overall results were softer than recent months. Forty-five percent of restaurant operators reported a same-store sales gain between August 2010 and August 2011, while 37 percent of operators reported lower same-store sales. In July, 48 percent of operators reported higher same-store sales, while 34 percent reported a sales decline.

Meanwhile, restaurant operators reported a net decline in customer traffic for the first time in three months. Thirty-four percent of restaurant operators reported an increase in customer traffic between August 2010 and August 2011, down from 40 percent of operators who reported higher traffic in July. In comparison, 42 percent of operators reported a traffic decline in August, up from 37 percent who reported lower traffic in July.

Overall, restaurant operators reported relatively steady levels of capital spending. Forty-four percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, roughly on par with 43 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 99.5 in August – down 0.1 percent from July and the lowest level in nearly two years. In addition, August represented the second consecutive month that the Expectations Index stood below 100, which illustrates restaurant operators’ uncertainty about business conditions in the months ahead.

Restaurant operators’ outlook for sales growth in the coming months continues to deteriorate. 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 39 percent last month and the lowest level in 19 months. In comparison, 23 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, matching the proportion who reported similarly last month.

Meanwhile, restaurant operators remain generally pessimistic about the direction of the overall economy in the months ahead. Only 18 percent of restaurant operators said they expect economic conditions to improve in six months, compared to 17 percent who reported similarly last month. Meanwhile, 31 percent of operators said they expect economic conditions to worsen in the next six months, matching the proportion who reported similarly last month.

Restaurant operators are slightly more optimistic about capital spending in the months ahead. Forty-four percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up slightly from 42 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.

The RPI is released on the last business day of each month, and more detailed data and analysis can be found on Restaurant TrendMapper (www.restaurant.org/trendmapper), the Association's subscription-based service that provides detailed analysis of restaurant industry trends.

New crop of farmers

Agriculture Deputy Secretary Merrigan Announces Assistance to Help Raise New Crop of Farmers and Ranchers

WASHINGTON, Sept. 30, 2011–Agriculture Deputy Secretary Kathleen Merrigan announced today that the U.S. Department of Agriculture (USDA) has awarded 36 grants totaling $18 million to organizations that will provide training and assistance to beginning farmers and ranchers to help them run successful and sustainable farms. As the average age of America's farmers and ranchers increases, and with traditional rural populations in decline, Merrigan said that now is a critical time to train the next generation of American producers.

“Beginning farmers and ranchers face unique challenges, and these grants will provide needed training to help these producers become profitable and sustainable,” said Merrigan. “American agriculture supports 1 in 12 jobs in America, a critical contribution to the strength and prosperity of the country. The sheer productivity of our farmers has given Americans access to a cheap, wholesome food supply and provides us with more discretionary income than much of the rest of the world. But our farmers are aging, and more of our young people are looking outside of farming for their careers. It's time to reverse these trends, keep farmers on the farm and help beginning farmers and ranchers thrive in their careers.”

USDA's National Institute of Food and Agriculture (NIFA) awarded the grants through its Beginning Farmer and Rancher Development Program (BFRDP). Under BFRDP, which was established through the 2008 Farm Bill, NIFA makes grants to organizations that implement education, training, technical assistance and outreach programs to help beginning farmers and ranchers, specifically those who have been farming or ranching for 10 years or fewer.

At least 25 percent of the program’s funding supports the needs of limited resource and socially disadvantaged farmers and ranchers, as well as farm workers who want to get a start in farming and ranching.

Projects were awarded in Arizona, California, the District of Columbia, Georgia, Iowa, Louisiana, Maine, Mississippi, Montana, Nevada, New Jersey, New Hampshire, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, Texas, Vermont, the U.S. Virgin Islands, Washington, Wisconsin and Wyoming. Project highlights include:

• A project in New York to provide workshops, conferences, apprenticeships, online resources and mentoring services for more than 1,200 beginning farmers by 2014.
• A project in Montana to offer financial, credit and marketing training to beginning American Indian farmers.
• A project in Mississippi to develop and disseminate training materials and decision-making tools to high school and college students who plan to enter farming and ranching.
A full list of awardees can be found online at: www.nifa.usda.gov/newsroom/news/2011news/beginning_farmer_awards.html.

BFRDP provided $18 million in funding this year, the third year of the program. Another $18 million will be made available in fiscal year 2012. For more information on the BFRDP program, visit: http://www.nifa.usda.gov/funding/bfrdp/bfrdp.html.

Through federal funding and leadership for research, education and extension programs, NIFA focuses on investing in science and solving critical issues impacting people's daily lives and the nation's future. More information is at: www.nifa.usda.gov.