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NRA: Restaurant woes dampen capital spending

WASHINGTON Capital-spending activity within the restaurant industry stood at a record low in September as operators reported weak sales and traffic results and more pessimistic attitudes toward the next six months, according to the National Restaurant Association.

Just 40 percent of operators polled monthly by the NRA for its Restaurant Performance Index said they had made a capital expenditure for equipment, expansion or remodeling since July, the lowest level on record. Operators also said they remain reticent to make plans for spending in the months ahead because of doubts related to the economy, consumer spending levels and the availability of lending. The NRA's report revealed that just 41 percent of operators plan to make large capital outlays in the next six months, another record low.

September marked a particularly tough time for the restaurant industry. Nearly two out of three restaurant operators reported negative same-store sales and traffic levels in September. Looking forward, 50 percent expect their sales in six months to be lower than the same period a year ago.

The industry's woes stem from economic conditions, including rising unemployment, increased costs for gas and utilities, and the bust in the housing sector that reduced many consumers' home equity values. According to the NRA, restaurant operators are not confident that macroeconomic trends will improve. Only 14 percent of operators said they expect economic conditions to get better in six months, down from 24 percent who reported similarly last month. Fifty percent of operators said they expect economic conditions to worsen in six months, up from 33 percent who reported similarly last month.

The NRA's Restaurant Performance Index is pegged to 100, which means results above 100 indicate that the industry is expanding, and results below 100 mean the industry is contracting. The September results stood at 96.7, down 1.7 percent from August and the 11th consecutive month of results below 100.

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