As a result of softer sales and traffic levels and restaurant operators' dampened outlook for the economy, the National Restaurant Association's Restaurant Performance Index (RPI) declined for the second consecutive month.

The RPI — a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry — stood at 100.7 in July, down 0.6 percent from June's level of 101.3. Despite the decline, the RPI remained above 100 for the fifth consecutive month, which signifies expansion in the index of key industry indicators.

"The RPI's July decline was the result of pullbacks in both the current situation and expectations indicators," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the NRA. "Most notably, restaurant operators' outlook for the economy fell to a five-month low, with only 23 percent expecting business conditions to improve in the next six months."

Current Situation Index

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.1 in July — down 0.6 percent from a level of 100.7 in June and the second consecutive monthly drop. Despite the recent declines, it remained above 100 for the fourth consecutive month.

Although operators continued to report net positive same-store sales in July, the results were softer than the previous two months. Forty-four percent reported a same-store sales gain between July 2012 and July 2013, down from 52 percent who reported higher sales in June and 63 percent who reported a sales gain in May. In comparison, 36 percent reported a decline in same-store sales in July, up slightly from 34 percent in June.

Operators reported a net decline in customer traffic for the first time in three months. Thirty-five percent reported higher customer traffic levels between July 2012 and July 2013, while 43 percent of operators said their traffic declined. In June, 43 percent reported an increase in customer traffic, while 39 percent reported lower traffic levels.

Despite the dampened sales and traffic results, restaurant operators reported positive capital spending levels. Fifty-eight percent said they made a capital expenditure for equipment, expansion or remodeling during the last three months, up from 52 percent who reported similarly last month.

Expectations Index

The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators, stood at 101.3 in July — down 0.6 percent from June and the lowest level in seven months. Despite the decline, each of the four expectations indicators stood above 100 for the seventh consecutive month, which indicates general optimism about business conditions in the months ahead.

Respondents' sales outlook was dampened somewhat from previous months. Thirty-seven percent expect to have higher sales in six months (compared to the same period in the previous year), down from 46 percent who reported similarly last month. Meanwhile, 9 percent expect their sales volume in six months to be lower than it was during the same period in the previous year, compared to 11 percent last month.

Operators are also less optimistic about overall economic conditions. Twenty-three percent said they expect economic conditions to improve in six months, down from 30 percent who reported similarly last month. Eighteen percent said they expect economic conditions to worsen in the next six months, up slightly from 16 percent last month.

Along with a dampened outlook for sales and the economy, restaurant operators reported a pullback on capital spending plans for the months ahead. Fifty-three percent plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 59 percent who reported similarly last month.

Operators' outlook for staffing levels remained generally positive for the coming months. Twenty-three percent plan to increase staffing levels in six months (compared to the same period in the previous year), while 10 percent said they plan to cut positions.

Read more about restaurant trends.

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