The outlook for the restaurant industry is positive for the coming months, as the National Restaurant Association’s Restaurant Performance Index (RPI) remained well above 100 in January. 

The RPI, a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry, stood at 101.3 in January, down from December’s strong level of 102.2. Despite the decline, January represented the third consecutive month that the RPI stood above 100, which signifies expansion in the index of key industry indicators.

“Although the Restaurant Performance Index dipped somewhat from December’s nearly six-year high, it remained solidly in positive territory,” says Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Restaurant operators reported positive same-store sales for the eighth consecutive month, and a majority of them expect business to continue to improve in the months ahead.”

Watch a video of Riehle providing commentary on the January RPI, key economic indicators, and gas prices.

The Restaurant Performance Index is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction for key industry indicators. 

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor, and capital expenditures), stood at 100.6 in January, down 1.5 percent from December’s seven-year high of 102.1. Despite the drop, the Current Situation Index stood above 100 for the third consecutive month, which signifies expansion in the current situation indicators. 

Restaurant operators reported positive same-store sales for the eighth consecutive month in January. Fifty-six percent of restaurant operators reported a same-store sales gain between January 2011 and January 2012, while only 26 percent reported a same-store sales decline. 

This was somewhat softer than December’s strong results, when 69 percent of operators reported a sales gain and 18 percent reported lower sales.   

Restaurant operators also reported positive customer traffic results in January. Forty-six percent of restaurant operators reported higher customer traffic levels between January 2011 and January 2012, while 30 percent reported a traffic decline. In December, 57 percent of operators reported higher customer traffic, while just 23 percent reported a traffic decline.

Along with softer sales and traffic levels, restaurant operators reported somewhat lower capital spending levels. Forty-two percent of operators said they made a capital expenditure for equipment, expansion, or remodeling during the last three months, the lowest level in 10 months.

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 102.1 in January – essentially unchanged from December’s level of 102.3. 

In addition, January marked the fifth consecutive month that the Expectations Index stood above 100, which represents an optimistic outlook among restaurant operators for business conditions in the months ahead.      

For the second consecutive month, a majority of restaurant operators expect their sales to be higher in the coming months. Fifty-three percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up slightly from 51 percent who reported similarly last month. 

In comparison, only seven percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, matching the proportion who reported similarly last month.

Restaurant operators also remain generally optimistic about the direction of the overall economy. Thirty-seven percent of restaurant operators said they expect economic conditions to improve in six months, down slightly from 39 percent last month. In comparison, only 11 percent of operators said they expect economic conditions to worsen in the next six months, matching the proportion who reported similarly last month. 

Along with a positive outlook for sales and the economy, restaurant operators also continue to plan for capital spending in the months ahead. Fifty percent of restaurant operators plan to make a capital expenditure for equipment, expansion, or remodeling in the next six months, the second consecutive month with at least half of operators planning to make capital investments. 

The RPI is based on the responses to the National Restaurant Association’s Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor, and capital expenditures. The full report and a video summary are available online at http://www.restaurant.org/research/economy/rpi.

The RPI is released on the last business day of each month, and more detailed data and analysis can be found on Restaurant TrendMapper (www.restaurant.org/trendmapper), the Association's subscription-based service that provides detailed analysis of restaurant industry trends.