U.S. restaurant operators’ sentiment improved last month, a promising sign for beef, pork and dairy producers hurt by a prolonged slump in foodservice demand.
The National Restaurant Association’s Expectations Index rose to 100.1 in January, up 0.2 percent from December, according to survey results released today. That marked the third increase in four months and the first reading above 100 in nine months. Figures above 100 indicate expansion, while number below 100 indicates contraction.
Growing optimism in the foodservice industry reflects the U.S. economy’s recovery from its steepest downturn in at least 25 years, said Hudson Riehle, the restaurant association’s senior vice president of research. As people dine out more, demand for steaks, chops, pizza and other food should increase this year, he said.
“Consumers are coming back,” Riehle said in a phone interview. “Demand will definitely grow in the year ahead” for beef and pork.
Earlier today, the U.S. Commerce Department said gross domestic product grew at a 5.9 percent pace during the fourth quarter of 2009, stronger than the 5.7 percent growth reported last month.
U.S. restaurant industry revenue is expected to reach $580 billion in 2010, up 2.5 percent from 2009, according to an association forecast.
Stepped-up restaurant business would bode well for beef, pork and milk producers, who rely on foodservice for a significant portion of demand. “Restaurant operators are relatively optimistic about improving sales growth and economic conditions in the months ahead,” Riehle said in a statement today.
Meanwhile, restaurant business eroded in January. According to the survey, 57 percent of operators reported a same-store sales decline last month, up from 49 percent reporting declines in December. Twenty-two percent reported a sales increase.
Still, a “host of challenges remain” for restaurants, including high unemployment, said Riehle, whose Washington, D.C.-based organization represents 945,000 restaurants and other foodservice outlets.
“From a restaurant operator’s perspective, there’s no substitute for getting national employment growth back,” Riehle said. That’s because growth in employment “generates demand for convenience (food). Secondly, employment growth helps bolster personal income growth.”
According to the association, 33 percent of restaurant operators surveyed in January expected to have higher sales in six months, compared to the same period the previous year, while 21 percent expected lower sales.
“The overall trend is positive” for restaurants, he said. “But it’s not a quick rebound to prosperity. Consumers still are extremely cautious on their expenditures, and restaurant operators have to have a very good price-value proposition.”
The restaurant association’s Current Situation Index fell to 96.6 in January from 97.3 in December, the 29th consecutive month of contraction.
The association’s Restaurant Performance Index, which combines survey data from the Current Situation and Expectations indexes, fell to 98.3 from 98.7, the 27th consecutive month of contraction.