Uncertainty over the broader economy in November kept the National Restaurant Association’s Restaurant Performance Index from reaching a level indicating optimism for growth, the second consecutive month that restaurateurs expressed such hesitance.
The RPI, a monthly composite that tracks the health of and outlook for the foodservice industry, rose to 99.9 in November, 0.5 points from where it stood in October. That number comes in just below the steady-state level of 100, signaling a slight contraction in the NRA’s index of key industry indicators.
Operators reported gains in their traffic and same-store sales in November, but their lack of clarity over the condition of the economy going into the holidays and fear of the approaching “fiscal cliff” kept the RPI’s month-to-month increase too low to reach an expansionary level, officials said.
“The November gain in the RPI was driven by improving same-store sales and customer traffic levels, both of which registered their strongest performance in three months,” said Hudson Riehle, senior vice president of the NRA’s Research and Knowledge Group. “However, restaurant operators remain concerned about the direction of the overall economy, due in large part to the uncertainty around the fiscal cliff.”
Late on New Year’s Day, Congress passed legislation to avoid the effect of automatic tax increases and spending cuts, known as the fiscal cliff. As a result, marginal income tax rates will stay at current levels for households earning less than $450,000 per year, but will rise for those earning more than that threshold. The “payroll tax holiday,” which had cut workers’ payroll tax rate from 6.2 percent to 4.2 percent during the past two years, will expire.
The RPI comprises two components: the Current Situation Index, which measures current trends in same-store sales, traffic, labor and capital expenditures; and the Expectations Index, which gauges restaurant operators’ six-month outlook for those factors.
The Current Situation Index for November was 99.8, up 0.6 points from its 99.3 score in October. Though operators reported net positive traffic and same-store sales for November, softness in the labor and capital spending indicators offset that performance and resulted in a Current Situation reading below 100 for the fourth time in five months, the NRA said.
Operators reported their strongest same-store sales numbers in three months, the NRA said, with 55 percent of respondents reporting same-store sales gains in November 2012 compared with a year earlier, up from only 40 percent of respondents in October. By contrast, 30 percent of operators reported same-store sales decreases in November, down from 36 percent of respondents in October.
Trends were similarly positive for restaurant traffic in November, with 43 percent of operators reporting traffic gains compared with a year earlier, up from 30 percent in October. Only 35 percent of operators noted a traffic decline in November, down from 41 percent in October.
However, only 37 percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the past three months, the lowest level for that indicator in 32 months, the NRA said.
The Expectations Index stood at 100 in November, up 0.4 points from October. The NRA noted that, while the indicator did improve slightly, a score only at the steady-state level of 100 still signals that operators were uncertain what the coming months had in store for their business conditions.
The RPI is based on responses to the NRA’s nationwide monthly tracking survey.
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