NEW YORK Newly released research from a trio of sources points to slowed restaurant industry sales trends and weakened consumer confidence in the early summer months, snapping a string of recent positive news that had sparked operator optimism.
The National Restaurant Association’s Restaurant Performance Index posted its first decline in five months this May, after hitting its highest level in 11 months back in April. The NRA index of restaurant activity, which was released Tuesday, surveys operators on four economic indicators including sales, traffic, labor and capital expenditures. The May result stood at 98.3, down 0.3 percent from April and its 19th consecutive month below 100. The index is pegged to 100, meaning results below that level indicate industry contraction, and results above 100 indicate industry expansion.
“The [index] decline was the result of restaurant operators’ dampened outlook for each of the four forward-looking indicators,” said Hudson Riehle, senior vice president of research and information services for the NRA. “Although restaurant operators remain relatively optimistic that economic conditions will improve in six months, their outlook for sales growth and capital spending activity softened somewhat.”
In addition, the latest Conference Board Consumer Confidence Index was released Tuesday, showing a retreat in June, after back-to-back months of improvements through May. The index now stands at 49.3, down from 54.8 in May. The two components of the index, the present situation index and the expectations index, each fell from previous levels.
The decline was caused by “a less favorable assessment of business conditions and employment,” said Lynn Franco, director of The Conference Board Consumer Research Center. “The decline É continues to imply that economic conditions, while not as weak as earlier this year, are nonetheless weak.”
The U.S. unemployment rate climbed to a recent high of 9.4 percent in May, and the Labor Department said Tuesday that unemployment rates in all of the largest U.S. metropolitan areas rose in May for the fifth straight month. The nation’s highest unemployment rate is in El Centro, Calif., where it hits 26.8 percent. Published reports said Tuesday that economists predict the U.S. unemployment rate will rise to 9.6 percent in June. The government is expected to release the new June national employment report on Thursday.
Finally, in a report last week, restaurant analyst Steve West at Stifel Nicolaus said restaurant industry sales trends got materially worse in April, May and June. The investment bank held a roundtable of 15 private-equity firms that together manage $150 billion in assets, including 40 different restaurant companies. The participants discussed the recent sales declines.
“Sales softened materially in June across all segments of dining and no one was sure why,” West said.
His research pointed to a few possible reasons for the industry’s latest sales slump, including a pullback in significant discounting by casual-dining chains during the past few months; increased unemployment and uncertainty surrounding an economic recovery; increased gas and oil prices; and rainy spring weather throughout much of the country.
Contact Sarah E. Lockyer at [email protected].