The National Restaurant Association’s Restaurant Performance Index (RPI) continued to indicate expansion in the restaurant sector but declined slightly in March. That was the over-arching conclusion in last week’s report from the NRA.

The RPI stood at 102.2 for the month, 0.4 points lower than in February but 0.6 points higher than one year ago. March marked the 25th straight month in which the RPI was at 100 or more, indicating expansion of the sector.

The chart shows historical data for the RPI and its two component indexes appears at right. It is our judgement that the declines of the past three months (the index peaked in December at 102.9) are no reason for alarm.

It would obviously be quite unusual for the index to get much higher than 103 (it has happened only 4 times in 12+ years) so the extent of the upward trend that began in late 2012 was probably limited.

The January through March declines do not yet suggest a shift to a downward trend and other measures of consumer behaviour and spending do not suggest that such a trend change is imminent.

We suspect that the recent lower index figures represent a stabilising of the sector — and a stabilising at a pretty high level — at least for the moment.

Other highlights of NRA’s monthly report are:

• The Current Situation Component decline 0.2 points in March to 101.8, marking its 13th month above the 100 level. Declines in the Customer Traffic (down 0.5 points to 101.1) and Capital Expenditures (down 0.6 points to 101.2) subcomponents pulled this index lower while Same-Store Sales (+0.2 points) and Labor (+0.1 points) supported it.
• The Expectations Component fell 0.7 points to 102.6 in March. That is its largest monthly decline since last September. The decline was driven by a large drop in the Capital Expenditures (down 1.9 points) sub-component and a drop in the Labor subcomponent (0.8 points). Expectations of Same-Store Sales and Business Conditions improved in March.
• Two per cent more operators (62 per cent vs 60 per cent) reported higher same-store sales versus one year ago. The share reporting lower sales, yr/yr, remained at 24 per cent. The share of operators expecting higher sales in the next six months versus one year ago remained at 59 per cent, its highest level since the end of the recession. The share expecting lower sales the next six months remained quite low at 3 per cent, 1 per cent lower than in April.
• The report says “Restaurant operators are generally optimistic about the direction of the overall economy.” That is certainly true but the share expecting better conditions over the next six months fell to 35 per cent, down 2 per cent from February and now 6 per cent lower than at its peak in December. The good news is that the share expecting worse economic conditions fell by 3 per cent from February to just 8 per cent in March. The remaining 57 per cent expect conditions to be stable.

Consumers attitudes remain positive. That would be our conclusion from the April observations of the Consumer Confidence Index from the Conference Board and the University of Michigan’s Consumer Sentiment Index.

The former declined by over 6 points (to 95.2) from its March level but the decline is not enough for us to be concerned that a new downtrend is now at hand.

The UM Sentiment Index improved by 2.9 points to 95.9, its second highest level (to January’s 98.1 - which was the highest figure since 2004) since consumer views started downward in early 2007.

The Conference Board cited the recent lacklustre performance of the labour market (the unemployment rate remained steady at 5.5 per cent in March and March total non-farm employment increased by a disappointing 126,000) and “apprehension about the short-term outlook” as reasons for its Confidence Index to decline.

UM cited expectations of continued low interest and inflation rates as a reason for positive gains in its Consumer Sentiment Index.