The National Restaurant Association’s Restaurant Performance Index tumbled 1.8 percent from 101.9 in March to 100.1 in April. A reading of more than 100 indicates expansion so the index remains in positive territory, but just barely. The Current Situation Index declined 2.1 percent to 99.7 percent, which indicates contraction among this component of the monthly study. Factors fueling the decline of the Current Situation Index include softening same store sales and customer traffic. The Expectations Index also declined as operators became less optimistic about both their own sales in the future as wall as the overall economy.

While 53 percent of operators report they continue to make capital expenditures for equipment, expansion and/or remodeling in the past 3 months – a number that has been relatively steady for the past months – the percent of operators planning capital expenditures in the next 6 months declined from 61 percent in March to 55 percent in April.

The sharp drop in the index is puzzling given a nice gain in March. It remains to be seen if the April report is a beginning of a trend or a statistical fluke.

Economic News This Week

  • The Bureau of Economic Analysis’ second estimate for gross domestic product for the first quarter of 2019 is +3.1 percent. This represents a .1 percent decline from the first estimate. Economists, businesses and others tend to look at a 3.0 percent growth in GDP as a desirable level.
  • Home price growth slowed for the 12th consecutive month. The S&P Core Logic Case-Schiller Home Price Index puts the home price increase in the past year at +2.3 percent, only slightly greater than the rate of inflation. Housing experts are surprised the housing market is not more robust given the strength of the economy and the good labor market.
  • The Bureau of Economic Analysis reported real disposable income increased 0.1 percent in April. Real personal spending increased less than 0.1 percent.
  • April private construction spending declined 1.7 percent from March. Residential construction spending in April declined by 0.6 percent from March.
  • The Conference Board’s Consumer Confidence Index increased in May, rising to 134.1 from 129.2 in April. The Present Situation Index stands at 175.2, up from 169 in April. The Expectations Index increased to 106.6 from April’s 102.7. The index is back to levels seen last fall when the reading was near an 18-year high. A spokesman for the Conference Board said the high levels suggest that there will be no significant pull back in consumer spending in the months ahead.
  • University of Michigan’s Index of Consumer Sentiment increased in its final reading for May. The index stood at 100.0 at the end of the month, up from 97.2 in April. The Current Economic Conditions Index fell from 112.3 in April to 110.0. The controversy over tariffs was the cause, according to a university spokesman. Consumers still have confidence in the future as indicated by the Index of Consumer Expectations increasing to 93.5 in May from 87.3 in April.

Foodservice News This Week

 

For details and same-store sales of other chains, please click here for the Green Sheet.