Latest Restaurant Index Falls Below 100

After showing mostly positive signs during the first several months of the year, the National Restaurant Association's Restaurant Performance Index fell below 100 in May for the first time in three months, according to the association's latest data. Sharp increases in wholesale food prices were partly to blame, along with a softening of customer traffic indicators. The RPI indicates that

WASHINGTON — After showing mostly positive signs during the first several months of the year, the National Restaurant Association's Restaurant Performance Index fell below 100 in May for the first time in three months, according to the association's latest data.

Sharp increases in wholesale food prices were partly to blame, along with a softening of customer traffic indicators. The RPI indicates that restaurant operators faced a net decline in same-store sales for the second straight month in May.

But despite a downturn in traffic, there was an increase in capital spending. In fact, 45% of operators said they had made a capital expenditure to buy equipment or expand or remodel their business during the past three months. This was the highest level of capital spending reported in the RPI in almost two years, which may reflect pent-up demand from the recession, and possibly hope for improving business conditions this year.

“Although the sales and customer traffic indicators softened in May, capital expenditure activity rose to its highest level in nearly two years,” Hudson Riehle, the association's senior vice president, research and knowledge, said in a release. “This, along with a continued positive outlook for sales and the overall economy, signals restaurant operators remain optimistic that business conditions will improve in the months ahead.”

Reserved optimism is evident in the RPI's Expectations Index, which measures the industry's six-month outlook. It remained in positive territory, at 100.8, in May.