While the National Restaurant Association offered some good news in the form of its monthly RPI, other foodservice-related economic indicators were not as positive.
The restaurant industry grew a little stronger in August, according to the National Restaurant Association's Restaurant Performance Index.
August's Current Situation Index, which had declined to less than 100 in July, signaling contraction, jumped 0.8 percent to 100.6 in August. This helped the overall RPI to rise 0.4 percent to 100.6. This was the first increase in the Restaurant Performance Index in five months. Moreover, the Current Situation component was driven by increases in two factors that most observers would deem very important – comparable store sales and traffic. The Future Expectations Index remained unchanged at 100.7.
The only negative part of the report was in the area of capital expenditures, where 41 percent of the operators said they invested in equipment, remodeling and expansion in the last three months, a 5 percent decline compared to July. And, 44 percent of operators said they plan to make a capital expenditure in the next 6 months, down from 5 percent from the previous month.
This good news from the NRA runs counter to the balance of news out this week.
Economic News This Week
• The latest Gross Domestic Product estimate from the Department of Commerce for the second quarter of this year fell to 1.3 percent, or a 0.4 percent decline. Some might find it nothing short of amazing that the media reacted so calmly to this significant statistic. This is particularly interesting in a national election year. It is also important to note that in the first quarter GDP grew at an annual rate of 2.0 percent. Earlier this year many economists and others expected GDP to grow 3 percent in 2012. Last year GDP grew at 1.8 percent after rising 2.4 percent in 2010. The really scary fact is that a drop from 1.3 percent to zero or below is not much of a fall given these paltry growth rates. No wonder the Wall Street Journal ran an article under the headline "Data Suggests Trouble Ahead" while the New York Times said the economy is "barely above stall speed."
• The Conference Board's Consumer Confidence Index took a jump from 61.3 in August to 70.3 in September. The "but" that accompanies this stat is that consumer confidence should be in the 90s or above to be considered in the good range.
• The Reuters / University of Michigan Consumer Index came in at 78.3 for August, which represents a 0.9 percent decline from the projected level.
• Durable goods orders took a major hit in August. The Commerce Department said orders for goods that last 3 years or longer fell by 13 percent.
• The Chicago Fed's Production Manufacturing Index went negative, dropping below the key 50 level to 49.7.
• Personal spending rose 0.5 percent in August while personal income rose just 0.1 percent. Rising energy costs accounted for a significant part of the spending increase, according to the Bureau of Economic Analysis. One economist noted that spending savings is obviously an "unsustainable" policy.
• Consumer spending rose 3.3 percent in 2011 according to the Department of Labor but consumer prices rose 3.2 percent. This was in contrast to 2010 when prices rose but income and spending both fell.
• Initial jobless claims declined by 26,000 to 359,000 for the week ending September 21. Claims for the previous week had, as usually happens, been revised up by 3,000. The Bureau of Labor Statistics noted that claim numbers have been moving in a narrow range of 360,000 to 390,000 since spring.
• There was mixed news from the housing market. S&P Schiller Case reported that housing prices continued to increase in July for the fourth straight month. However, the report points out that housing prices are 30 percent less than the peak they reached in 2006. Meanwhile the National Association of Realtors said pending home sales dropped. The U.S. Commerce Department said new home sales fell very slightly in August and are almost 28 percent higher than they were in August 2011.
Foodservice News This Week
• The Department of Labor says food – both at home and away – accounts for 13 percent of all consumers' spending. This is up from 12.7 percent in 2010. In developing countries food accounts for 40 percent to 50 percent of consumers' spending.
• The cost of food away from home rose 0.2 percent in August, compared to July's level. Food away from home prices are up 2.8 percent over August of last year. Further, the USDA states that food away from home prices were up 1.3 percent in 2010, up 1.9 percent in 2011 and predicts they will be up 2 percent to 3 percent this year. The forecast for next year is 2.5 percent to 3.5 percent.
• The restaurant industry is beginning to rebound with consumers eating out more often and spending more when they do according to CHD Experts. The research company says West Virginia and New York led the way in increased eating out with traditional American fare, Mexican and bar and grill restaurants showing the most growth while fine dining and upscale restaurants were flat.
• Is it cheaper to eat at home or eat out? The Business Insider attempted to answer this question by comparing the cost of preparing at home some menu items at well know restaurants. The writer concluded it was less expensive to eat out in most cases particularly when the time to shop, prepare the meal and clean up was factored in. However, overlooked were the cost of tips, beverages (which are usually a lot cheaper at home) as well as travel time and cost to and from the restaurant. More involved studies over the years have found that one person households may indeed save money eating depending on both were they eat and home much grocery food goes to waste. Two person households can find the costs go either way but when there are three or more people in the home, it usually becomes cheaper to eat at home.
• Buffalo Wild Wings got a big boost in brand mentions on Twitter thanks to the officiating fiasco at the end of the Green Bay/Seattle game, according to Ad Age. BWW has been running TV commercials in which fictional NFL game officials make purposely erroneous calls so that people can party longer at the restaurant.
• Growth Chains: Mooyah plans on having 200 restaurants by the end of 2014. 7 Eleven will add 30 new stores in New York City to the 100 locations already in operation. The c-store giant has 100 locations already in New York City and will open 12 new units by the end of this year. Domino's has reached the 10,000 restaurant mark with the latest addition being in Istanbul. Mama Fu's plans to open 10 to 14 new restaurants by the end of 2013. Despite higher labor costs, Starbucks plan to expand into Sweden and Norway. Buffalo Wild Wings has reaffirmed its goal of having 1,000 restaurants by the end of 2013.
• Comparable Store Sales Data this week are Arby's (up 4.9 percent) and Pizza Inn (company owned down 4.2 percent & franchised down 4.4 percent).
For details and information on other chains same store sales, please click here.