U.S. restaurant operators’ sentiment reached a 2-1/2-year high in March as the improving economy bolsters prospects people will eat out more, an industry group survey indicated.
The National Restaurant Association’s Performance Index rose to 100.5 last month, up from 99 in February and the highest monthly reading since September 2007, the Washington, D.C.-based group said in a statement today.
“Restaurant operators reported net gains in both same-store sales and customer traffic in March, the first time in 31 months that both indicators stood in positive territory,” Hudson Riehle, the restaurant association’s senior vice president of research, said in the statement.
Additionally, restaurant operators “are increasingly optimistic about growth in sales and staffing levels in the months ahead, while their outlook for the economy soared to its strongest level in five years,” Riehle said.
Improving restaurant business is encouraging for the beef, pork, dairy and fresh produce industries, especially with supermarket food sales expected to grow little this year. Restaurants and other foodservice venues account for a significant portion of the demand for steaks, burgers, cheese and other products.
The association’s Performance Index, based on a survey of restaurant operators, reflects both current conditions and expectations for the industry. A reading above 100 suggests expansion, while numbers below 100 indicate contraction, the association said.
Based on the index, the restaurant industry has been in a contraction phase for more than two years.
Restaurant operators are gaining confidence in their sales prospects and the direction of the economy, the association said.
According to the March survey, 50 percent of restaurant operators said they expect higher sales in six months compared with the same period the previous year. That figure is up from 44 percent the previous month is and the highest level in 33 months, the association said.
Fifteen percent of operators expect sales volume in six months to be lower, compared with 16 percent the previous month.
U.S. restaurants still face an uphill climb with the economy’s recovery tenuous and the unemployment rate, at 9.7 percent in March, near the highest level in 26 years.
The recession hit hard at fine-dining restaurants and steakhouses as consumers shifted to cheaper options or ate at more at home.
During the recession, “the first thing (consumers) scaled back was restaurant meals,” Bob Goldin, executive vice president of Chicago-based researcher Technomic Inc., said April 22 at the United Fresh Produce Association convention in Las Vegas.
As the economy recovers, consumers probably will change their food-buying habits first by going for extras at grocery stores and then by returning to restaurants, Goldin said.
“It’s too early to call this a recovery — we’re not out of the woods yet — but we can see a light at the end of the tunnel,” Goldin said.
The restaurant association’s Current Situation Index, which measures same-store sales, restaurant traffic, labor and capital expenditures, was 99 in March. While that’s up from 96.7 in February, the sub-100 reading indicates the industry hasn’t completely moved beyond a contraction phase.
“Although the same-store sales and traffic indicators turned positive in March, the labor and capital expenditure indicators continued to lag behind, which led to an overall reading below 100,” the association said in today’s statement.
The association still expects higher overall sales for restaurants this year. U.S. restaurant industry revenue is expected to reach $580 billion in 2010, up 2.5 percent from 2009, according to an association forecast earlier this year.
With reporting by Ashley Bentley of The Packer