A U.S. restaurant performance index fell to an 11-month low in July, as the nation’s debt woes contributed to a souring outlook on the economy, the industry’s primary trade association said.

The National Restaurant Association’s Performance Index fell to 99.7 last month, down from 100.6 in June and the lowest level since August 2010, the Washington, D.C.-based group said in an Aug. 31 statement.

“Although same-store sales and customer traffic levels remained positive in July, restaurant operators’ outlook for the economy took a pessimistic turn,” Hudson Riehle, the restaurant association’s senior vice president of research, said in the statement.

Softness in labor and capital spending outweighed the positive traffic and sales during July, the association said. Based on a survey of restaurant operators, the index reflects both current conditions and expectations for the industry for the next six months. A reading below 100 indicates contraction.

The protracted negotiations over the federal debt ceiling and Standard & Poor’s downgrade to its U.S. credit rating added “an additional layer of uncertainty in an already fragile economic recovery,” Riehle said. “However, if the economy can avoid additional negative shocks in the months ahead, the overall fundamentals continue to point toward growth in the second half of the year.”

The restaurant business has come under pressure in recent months as high unemployment, expensive gasoline and a weak housing market discouraged people from eating out. That’s concerning for fresh produce growers and other food producers, who rely on restaurants, hotels and other foodservice operations for a large portion of demand.

In current dollar terms, industrywide sales were projected to reach a record $604.2 billion in 2011, up 3.6% from 2010, Riehle said in May. When accounting for inflation, restaurant sales are expected to rise 1.1% this year, the first increase since 2007. Sales fell an average of 1.3% the previous three years.