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Economy Still Putting Sqeeze on Restaurants

11:20AM Sep 07, 2010

The National Restaurant Association's (NRA) comprehensive index of restaurant activity was virtually flat in July, reflecting soft sales and traffic levels. The Association's Restaurant Performance Index (RPI), a monthly composite index that tracks the health of and outlook for the U.S., stood at 99.4 in July, down 0.10 from the June level and its fourth consecutive decline. The index has been below 100 for three straight months, signaling contraction in the industry.

Link to full report on restaurant index.

Meanwhile, the Conference Board Consumer Confidence Index, which declined in June, posted moderate improvement in August to stand at 53.5, up from 51.0 in July. The Conference Board also said consumers were also slightly less pessimistic about future employment prospects.

"While there were signs in recent months that the short-term outlook may be improving, the latest figures indicate that the restaurant industry's recovery has yet to fully gain traction," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the National Restaurant Association. "Restaurant operators continued to report declines in same-store sales and customer traffic in July, and their previously-optimistic outlook for sales growth and the economy softened in recent months."

Restaurant operators reported negative same-store sales for the fourth consecutive month in July, with the overall results similar to the June performance. Thirty-nine percent of restaurant operators reported a same-store sales gain between July 2009 and July 2010, matching the proportion of operators who reported higher sales in June. Meanwhile, 44% of operators reported a same-store sales decline in July, compared to 43% of operators who reported negative sales in June.

Despite the deteriorating outlook, restaurant operators reported a slight uptick in plans for capital expenditures. Forty-three percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up slightly from 41% who reported similarly last month.

This article was originally published Aug. 31, at