The National Restaurant Association's Restaurant Performance Index improved slightly in November but remained below 100, indicating contraction. The Current Situation Index increased 0.5 points to 99.8 while the Expectations Index rose 0.3 points to 100. Same-store sales and customer traffic rebounded after declining in October but remained below year-ago levels. Operators' economic outlook for the next six months remained negative, with more expecting conditions to worsen than improve.

1. Vol. 11, No. 2 January 3, 2013
The National Restaurant Association’s Restaurant Perfor- NRA CURRENT SITUATION, EXPECTATIONS &
mance Index (RPI) improved slightly in November but failed to rise
above the 100 level which demarks expansion from contraction.
COMPOSITE RESTAURANT PERFORMANCE
The benchmark Composite Index stood at 99.9 for the month, up from 106.0
INDEXES
October’s 99.5 and but solidly below the 100.6 reported for one year Current Situation Component
ago. Both components of the index improved in November with the Expectations Component
104.0
Current Situation Index gaining 0.5 points to reach 99.8 and the expec- Restaurant Performance Index
tations index gaining 0.3 points to reach 100.0. Those figures compare
to 100.2 and 100.9, respectively, one year ago. 102.0
November marks the fourth time in the past five months in
which the Current Situation Index has been below 100. We think the 100.0
real question is whether the November gains are a reversal of the nega-
tive trend that has been in place since April or is another “head fake”
such as occurred in August when both index components made similar 98.0
gains only to lose ground again in September and, even more dramati-
cally, in October. November’s Current Situation Index was supported 96.0
by a sharp increase in same-store sales and customer traffic, both of
which rebounded from a disappointing October. The Same-Store Sales
94.0
index gained 2.1% to reach 102.5 in November while the Customer J-03 J-04 J-05 J-06 J-07 J-08 J-09 J-10 J-11 J-12
Traffic component of 100.8 ws 1.9% higher for the month. Both com- Source: National Restaurant Association
ponents were still slightly lower than in November 2011.
The Labor component, which measures numbers of employ- negative and, lo and behold, people may act have indeed reacted nega-
ees and hours worked and stood at 98.4 in November, was 0.1% lower tively. Funny how that works.
than in October. The big drag on the Current Situation was Capital We still find it interesting that foodservice operators’ expecta-
Expenditures component which lost 1.8% to fall to 97.5. That figure is tions are so near their rating of current conditions. As you can see in
1.6% lower than one year ago and is at its lowest level since April 2010. the chart, foodservice operators have, in general, been an optimistic lot
The percentage of operators reporting gains in same-store with their expectations of performance running well ahead of their judg-
sales improved in November. Fifty-five percent (55%) said sales were ment of actual performance. And such was the case in both good times
higher than one year ago while only 30% reported lower sales. Those (judged by when the indexes were consistently above 100 from ‘04
numbers compare to 40% and 26%, respectively, in October. The Oc- through ‘06) and bad. But the past 18 months have seen the two com-
tober percentages were the worst reported for the entire year of 2012. ponent indexes track quite closely with one another and, if anything,
Operators expectations for sales growth improved as well. grow closer since last summer. It doesn’t appear that foodservice oper-
The percentage of respondents expecting higher sales six months ators — or at least those surveyed for the index — are getting ahead of
hence grew from 31% in the November survey to 37% in December. the here and now.
The percentage expecting lower sales fell from 21% to 14%. While One last musing — at least we hope it is the last one — on
improved, it should be noted that the December figures are still sharply Friday’s Hogs and Pigs report. We realize that slaughter is the only
worse than those from as recent as July when 50% expected higher output measure that actually gets counted and is, thus, the ultimate
sales in six months and 13% expected lower sales. measure of how many hogs exist. It is also driven by the number of
Finally, operators re still generally negative about the econom- hogs born and surviving in some previous period. But differences be-
ic outlook for the net six months. The percentage expecting improve- tween the two flows (pigs being born and pigs being slaughtered in a
ment over that period (21%, up only 1% from November) is still much later time period) can be impacted by changes in the rates of flow.
lower than the percentage expecting worse conditions (36%, down 2% We raise the question, of course, in light of USDA’s big revi-
form November). As recently as October more operators expected im- sion in the March-May pig crop (+636,000 head) last week. We realize
provement than expected worsening of conditions and the percentage that Sep-Nov slaughter was higher than normal but prolonged summer
were almost perfectly reversed as recently as June when 36% expected heat likely pushed some pigs from slaughter in August to slaughter in
improvement and 19% expected worse conditions. September. In addition, producers’ well-documented efforts to reduce
We think it is important to remember that these data were all feed expenditures by getting pigs to market earlier likely pulled pigs
collected during and shortly after a period when our political candidates forward — including from December to November. The 636,000 head
were constantly trying to scare voters (who happen to also be consum- revision represents only 1.44 days worth of slaughter. Was the number
ers) just how awful things were in the U.S. — and how much worse of pigs farrowed in the spring quarter really larger or did they just flow to
things would get if the other side won the election. Combine that with slaughter differently? Part of that answer will lie in Dec-Feb slaughter
unemployment and disposable income levels that were in fact pretty relative to the Jun-Aug pig crop.
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