RPI Rises Third Straight Month
Current Situation Index Drops
The Current Situation Index measures current trends in four industry indicators: same-store sales, traffic, labor, and capital expenditures. Despite overall improvement in the RPI, the Current Situation Index dropped 0.4%, from 96.5 in February to 96.1 in March. This was its first decline in three months and 19th straight month under 100.
Restaurant Same-Store Sales
Same-store Sales Drop, Too
Same-store sales dropped for the 10th straight month, with 24% of respondents reporting an annual same-store sales gain in March, as opposed to 29% in Feburary. The percentage of respondents reporting an annual same-store sales decline also rose, to 63% in March compared to 56% in February. The National Restaurant Association partially attributed negative same-store sales performance to Easter falling in April this year as opposed to March in 2008.Customer Traffic Also Declines
Customer traffic levels, which held steady in February, declined in March. Only 20% of respondents reported increased customer traffic levels, compared to 22% in February. And the percentage of respondents reporting decreased customer traffic levels climbed from 59% in February to 63% in March.Expectations Index Shows Optimism
Despite decreases in the Current Situation Index, respondents showed optimism about where the restaurant industry is headed in their responses to the Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators: same-store sales, employees, capital expenditures and business conditions. The Expectations Index stood at 99.4 in March, a 0.9% increase from 98.5 in February and its fourth consecutive monthly gain. Although the Expectations Index remained below 100 for the 17th consecutive month, it rose to its strongest level in 14 months.Same Store Sales Outlook Improves
Respondents were a little more positive in their future expectations for same-store sales in March. The percentage of respondents expecting higher same-store sales in six months rose from 25% in February to 30% in March. The percentage expecting lower same-store sales in six months dropped from 41% in February to 38% in March.Economic Outlook Noticably Brightens
Respondents were definitely more upbeat about where they see the economy heading in six months. The percentage expecting economic conditions to improve in six months rose from 22% in February to 30% in March. In addition, the percentage expecting economic conditions to worsen in six months dropped from 36% in February to 21% in March. This marks the first time in 18 months more respondents expect economic conditions to improve, rather than deteriorate in six months, as well as the highest percentage expecting better conditions in 21 months.Mixed Economic Signals Continue
The third straight month of improved RPI performance is a positive economic indicator for retailers. However, the overall outlook on the health of the economy remains mixed, as a number of positive and negative signals continue to appear on the economic landscape. Following are some recent contrasting economic indicators:Positive Signals
- The Consumer Confidence Index rose sharply in April 2009.
- Online shopping activity is showing signs of improvement.
- The U.S. trade deficit shrank in January 2009, although declining consumer demand drove the reduction.
- Personal spending of U.S. consumers increased in February 2009.
Negative Signals
- The U.S. GDP shrank from 6.3% to 6.1% in Q1 2009.
- Total spending for the Mother’s Day holiday is expected to decline.
- Mexico applied retaliatory tariffs to 89 U.S. products in March 2009.
- U.S. retail and food services sales fell in February 2009.
- U.S. unemployment hit 8.5% in March 2009.