Restaurant Performance Index Reaches 3-Year High

The National Restaurant Association (NRA) reported today that its Restaurant Performance Index reached a three-year high of 100.7 in October, the highest level since September 2007 (see chart above).  Restaurant sales set a new monthly industry record in October, with sales above last October by more than 4%, and year-to-date restaurant sales above last year by 2.6%.  There were 24,000 new restaurant industry jobs added in October, bringing the total number of new jobs added this year at U.S. restaurants to more than 130,000.  

A spokesman for the NRA, senior VP Hudson Riehle, credited recent improvements in real disposable income (+2.5% year-over-year gain in October, the highest increase in more than two years) as the main driver of increased restaurant activity in October.  Further, Riehle says that with the upcoming holiday period ahead, it is definitely turning into a sales growth momentum  environment for the restaurant industry, which is expected to carry well into 2011.     

Consumer spending at restaurants is highly cyclical, and consumers can easily reduce this type of discretionary spending as economic conditions weaken, and this is exactly what the graph above shows.  In fact, consumers starting cutting back on restaurant spending in the late summer of 2007, even before the recession officially started.  The upward trend in the restaurant index over the last year suggests that consumers are gradually becoming more confident and eating out more often, and it looks like this trend will continue.