“Bolstered by stronger same-store sales and customer traffic levels, the
National Restaurant Association’s Restaurant Performance Index (RPI) stood
above 100 for the eighth consecutive month in June. The RPI – a monthly
composite index that tracks the health of and outlook for the U.S. restaurant
industry – stood at 101.4 in June, unchanged from May’s level (red line in
chart). June represented the eighth consecutive month that the RPI remained
above 100, which signifies expansion in the index of key industry indicators.
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 101.3 in June – down 0.7 percent from May and the third consecutive monthly decline (blue line in chart). Although June marked the
tenth consecutive month that the Expectations Index stood above 100, it also
represented the weakest level in seven months.”
MP: Both the RPI and the Expectations Index have remained above 101 for the last seven months, which is consistent with the levels for those two indexes back in the pre-recession time frame in late 2006 and early 2007. This is one indication that the U.S. restaurant industry is operating at pre-recessionary levels.
More evidence of an improving market for U.S. restaurants is provided by Census data showing that sales for "Food Services and Drinking Places" increased 6.3% in June from a year ago, following a 7.4% increase in May. After being flat for most of 2008 and 2009, "Food Services and Drinking Places" sales activity in June of this year is 16.5% above the June level three years ago when the recession officially ended. Further, sales at "Full Service Restaurants" were up by 8.2% year-over-year in May (data not yet available for June) following a gain of 8.7% in April.
Many of the key indicators suggest that the restaurant industry has gradually recovered from the effects of the 2008-2009 recession, and inflation-adjusted restaurant sales are now almost back to their pre-recession levels. Regardless of how consumers answer confidence survey questions, the ongoing improvements in restaurant sales and the RPI so far this year would indicate that based on actual consumer spending at restaurants, consumer confidence is fairly high.
MP: Both the RPI and the Expectations Index have remained above 101 for the last seven months, which is consistent with the levels for those two indexes back in the pre-recession time frame in late 2006 and early 2007. This is one indication that the U.S. restaurant industry is operating at pre-recessionary levels.
More evidence of an improving market for U.S. restaurants is provided by Census data showing that sales for "Food Services and Drinking Places" increased 6.3% in June from a year ago, following a 7.4% increase in May. After being flat for most of 2008 and 2009, "Food Services and Drinking Places" sales activity in June of this year is 16.5% above the June level three years ago when the recession officially ended. Further, sales at "Full Service Restaurants" were up by 8.2% year-over-year in May (data not yet available for June) following a gain of 8.7% in April.
Many of the key indicators suggest that the restaurant industry has gradually recovered from the effects of the 2008-2009 recession, and inflation-adjusted restaurant sales are now almost back to their pre-recession levels. Regardless of how consumers answer confidence survey questions, the ongoing improvements in restaurant sales and the RPI so far this year would indicate that based on actual consumer spending at restaurants, consumer confidence is fairly high.
The BLS shows their "Food away from home" subcategory averaging 3% inflation for the last 6 months, on an annual change rate basis.
ReplyDeleteHere's the last 6 months for the Restaurant Performance Index (RPI), on an annual change rate basis.
1.1%
1.2%
1.2%
0.7%
1.5%
0.8%
Both the current situation index and the expectations index show similar data, in the sense that inflation rate changes are higher than all the restaurant.org change rates.
Always a fan of good news, I recommended your blog to my Objectivist friends on "Rebirth of Reason." That said, though, I have to ask what could be the cause of these upswings and upturns? Did the Bush-Obama Bailouts work as intended? Do we spend more because the FRB and Treasury pumped a trillion in cash into the economy? Is it spillover from the Dakota Boom, with restaurants in Fargo being 1000% better off and those in Fresno still being only 90% of 2002? Was this rise in consumption caused by the lifting of our animal spirits via good news? ... or did the failures of 2008 simply wash out and clear regardless of the smoke and mirrors of the Bush-Obama planners? Was (and is) the general economy always strong as expected, except for the temporary downturn in one sector back in 2008? Or is it something else?
ReplyDeleteHere's a suggestion about restaurants based on completely anecdotal evidence:
ReplyDeleteSince 2009, corporations have been reducing staff through attrition. That's certainly true where I work and at my wife's hospital.
At the same time, business has rebounded to pre-recession levels.
Rather than take a chance on hiring replacement staff, corporations have just given more work to the remaining staff.
When staff people work longer hours, they are more tired, and less likely to prepare food at home. As a result, restaurant sales increase by at least as much as the recovery, and likely more.
But the RPI is not a dollar based measure, it's a survey-based measure, so it wouldn't make any sense to compare it to inflation. It would be like comparing changes in the consumer confidence index to inflation rates.
ReplyDeleteAnything above 100 for the RPI indicates expansion, so we can say that the restaurant industry is expanding.
Restuarant employment is outpacing economic growth in 35 states. Texas leads the nation with 50,800 added employees in the last year.
ReplyDeleteAnything above 100 for the RPI indicates expansion, so we can say that the restaurant industry is expanding.
ReplyDeleteInflation is expanding too.
Completely ignoring inflation in the context of how well or poorly something is doing in not wise.
Additionally, McDonalds or other lower priced fast food restaurants doing well will bias the performance index towards looking better than it should, much like WMT does in retail sales.
Bart:
ReplyDelete"Additionally, McDonalds or other lower priced fast food restaurants doing well will bias the performance index towards looking better than it should, much like WMT does in retail sales."
RPI is an index. Does the size of individual firms really matter? While a large chain might cause more volatility, if restaurants "overall" are doing well, then restaurants "overall" are doing well.
Same with retail. WMT doing well means a large number of individual stores are doing well.
Do you think the value of the indicator is lower due to the widely differing sizes of the components?
RPI is an index. Does the size of individual firms really matter?
ReplyDeleteTrue that it's an index, but if people go to lower priced eateries (or go much more to discount stores like WMT or dollar stores for retail) it would look better than it "should".
I doubt that it reflects inflation either.
The restaurant industry employs 15 million. I think its 15 million. I guess we will take any jobs that we can get at this point even if their temporary or part time or even if their in the restaurant industry.
ReplyDelete