Driven by stronger service and retail sales, the Professional Beauty Association’s (PBA) Salon & Spa Performance Index (SSPI) rose to 103.5 in the fourth quarter, up 0.2 percent from the third quarter and the second highest level on record. The SSPI is a quarterly composite index that tracks the health and outlook of the U.S. salon/spa industry.

Following a modest decline in the third quarter of 2010, salon/spa owners are now becoming more optimistic with the future outlook of the beauty industry.

“These results are significant and show how the beauty industry remains strong through tough economic conditions,” said Steve Sleeper, Executive Director for the Professional Beauty Association. “The more confidence we have about the general outlook of the economy, the key industry indicators will continue to increase.”

The SSPI is based on the responses to PBA’s “Salon & Spa Industry Tracking Survey” which is fielded quarterly among salon/spa owners nationwide on a variety of indicators. It is constructed so that the health of the salon/spa industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction. The Index consists of two components—the Current Situation Index and the Expectations Index.

The Current Situation Index, which measures current trends in five industry indicators (service sales, retail sales, customer traffic, employees/hours, and capital expenditures), rose to 101.6 in the fourth quarter, up 0.3 percent from its third quarter decline of 0.9 percent. Service and retail sales registered solid growth, while customer traffic, employees/hours and capital expenditures slightly decreased. Regardless of the registered mixed indicators, all five industry indicators have recorded positive improvement since the fourth quarter of 2009. Overall, the Current Situation Index remains above 100 and in the range of expansion.

The Expectations Index, which measures salon/spa owners’ six-month outlook on five industry indicators (service sales, retail sales, employees and hours, capital expenditures, and business conditions). With a significant increase of nine percent from the second quarter in 2010, salon/spa owners remain confident in the direction of the general economy. Additionally, 70 percent of salon/spa retailers said they expect higher retail sales in the next six months. The outlook for capital spending increased 0.8 percent from the third quarter and salon/spa owners plan to invest in equipment or expansion or remodeling in the upcoming months.

With the rising levels of the Current Situation Index and the Expectations Index in the fourth quarter, the beauty industry is bouncing back from the previous quarter and the outlook is positive according to salon/spa owners.
The full SSPI report and the “Salon & Spa Tracking Survey” can be found at www.probeauty.org/research.