Bruce Grindy is the National Restaurant Association's senior economist Check out Bruce's past articles.

The industry was on a solid footing at the mid-point of 2005.

Looking back on the first half of the year, the positives certainly outweighed the negatives, in terms of restaurant industry performance. From same-store sales to job growth, the industry was on a solid footing at the mid-point of 2005.

In terms of same-stores sales, the first half of 2005 came in solidly above their 2004 levels.

According to the National Restaurant Association’s monthly Restaurant Industry Tracking Survey, restaurant operators reported positive same-store sales in each of the first six months of the year. February, March, April and June were the strongest months, with a solid majority of restaurant operators reporting higher same-store sales.

Restaurant Operators’ Reporting of Same-Store Sales versus Same Month in Previous Year

Source: National Restaurant Association

In addition, the restaurant industry was a jobs machine in recent months, fueling much of the growth in the overall economy. Restaurants and bars -- the primary component of the overall restaurant and foodservice industry -- added 29,500 jobs in July 2005, marking the 29th consecutive month of job growth in the industry. During the 29-month period from March 2003 to July 2005, restaurants and bars added 619,300 jobs, or roughly 17% of the total net jobs added to the overall economy during that period. For a sector that represents approximately 7% of the total U.S. employment base, the recent performance has been truly astounding.

If, as expected, the current trends continue, the restaurant industry will add more than 250,000 jobs in 2005, its second consecutive year above the quarter-million mark. In 2004, restaurants and bars added nearly 266,000 jobs – the strongest annual gain since a record 280,400 jobs were added in 1995.

Challenges Remain

Despite the positive news in the first half of the year, challenges remain, with soaring gas prices among the largest risks in the short term. The average price of a gallon of regular gasoline hit another record high (unadjusted for inflation) of $2.61 on August 22 -- a jump of 32 cents in the last three weeks, according to data from the Energy Information Administration. Compared to the same period last year, gas prices were up a whopping 73 cents per gallon. Although the rising gas prices didn’t seem to significantly impact summer travel, it will unquestionably be a drain on consumers’ pocketbooks in the months ahead, as prices are not expected to fall dramatically.

Average Retail Price Per Gallon of Regular Gasoline, including Taxes

Source: U.S. Energy Information Administration

A Positive Future

Looking ahead, conditions appear favorable for continued restaurant industry sales growth during the second half of the year. While rising energy prices and interest rates may have a dampening effect, the U.S. economy appears to be on firm footing for sustainable growth. Indeed, restaurant operators remain optimistic about the economy, as 90 percent of operators expect economic conditions in six months to be better or about the same as they are now. We share in their optimism, and expect continued restaurant sales gains in 2005 -- marking the 14th consecutive year of real growth.

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