Driven by stronger retail sales, customer traffic, labor and capital spending, the Professional Beauty Association’s (PBA) Salon & Spa Performance Index (SSPI) rose to 104 in the first quarter—up 0.4 percent from the fourth quarter 2010 and up 0.8 percent year over year.

The SSPI is a quarterly composite index that tracks the health and outlook of the U.S. salon/spa industry. Following a modest increase in the fourth quarter of 2010, salon/spa owners continue to see positive indicators for the industry and remain optimistic about future growth.

“The Salon & Spa Performance Index continues to see steady gains as consumer spending and confidence returns,” said Steve Sleeper, Executive Director for the Professional Beauty Association. “The significant rise in capital spending by salon and spa owners is also very optimistic and indicates more business owners are confident in their future.”

The SSPI is based on 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 102.5 in the first quarter—up 0.9 percent from fourth quarter 2010. While service sales were slightly down in the first quarter, 57 percent of salon/spa owners reported higher retail sales along with a net increase in overall customer traffic across the industry. Labor registered its highest increase since the inception of the Index with 34 percent of salon/spa owners adding employees. Salon/ spa owners also invested in their business with capital spending on equipment, expansion or remodeling up 32 percent from the fourth quarter.

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) remained relatively unchanged, but still highly optimistic. A strong majority of salon/spa owners believe net sales will continue to improve. Their outlook for capital spending however dropped off slightly. Based on the rise in capital spending in the first quarter, this would be logical as many have made their investments for the year.

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