Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
January 15, 2008

Regulatory Report:
Sponsored by:
San Francisco Judges Okay City's Universal Healthcare Plan
Fulton, Mo., Prepares Food Code Change, Then Tables It
Connecticut Sees Green In New Buildings' Future
FDA Now Looking At Salt Control
Canadians, Marylanders Start Trans Fat Diet

Industry Report:
Sponsored by:
Server Products

Berkshire Hathaway Buys Equipment Makers With Marmon Group Acquisition
Water, Water Everywhere, But Not Near Water Conventions
Subway Employees Ride Internet For Food Safety Info

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In This Section:
Stainless Pricing To Moderate, Other Commodities Mixed
Tough Period For General Economic News, Some Restaurant Chain Same-Store-Sales Comparison
Economists Cut Consensus Forecasts For 2008 Again, Says Blue Chip, As Worry About Recession Increases

This issue's Regulatory ReportSponsor: Enodis
Industry ReportSponsor: Server Products

Economic Report Manitowoc Foodservice Group

Stainless Pricing To Moderate, Other Commodities Mixed
You might think the slowdown in the U.S. economy would reduce pressure on materials prices. Well, yes and no.

The latest quarterly transaction-price data and forecasts for more than 100 metals, materials and other key commodities tracked by Purchasing magazine show some moderation— 4% overall in fourth-quarter 2007—and a moderating trend in '08 for some key materials used in foodservice equipment and supplies. But others will continue to rise, though less aggressively, at least in the short-term.

The best news for E&S is the precipitous drop in 300 series stainless grades since the third quarter '07. Since reaching a high of $5,670 a ton with surcharges, 304 sheet average prices fell to $3,961 in the fourth quarter. Purchasing forecasts prices will continue to moderate gradually through '08, falling to $2,749 by the fourth quarter.

But other steels including cold-rolled and galvanized, and other key E&S materials such as aluminum, copper and plastics resins, are expected to increase in cost or remain at historically high levels. And energy prices, including oil, natural gas and electricity are forecast to remain pricey throughout '08.

Information on Purchasing's materials forecasts, as well as its range of newsletters covering metals and other materials, is available at


Section sponsored by Manitowoc Foodservice Group

Tough Period For General Economic News, Some Restaurant Chain Same-Store-Sales Comparison
The spate of economic and restaurant industry reports over the past couple weeks might make you think the world is coming to end. It isn't, but the evidence that the economy slowed in the fourth quarter is becoming irrefutable. The litany of negative numbers has many in Washington, D.C., discussing the possibility of economic stimulus.

The first bad news items were reports of a slowdown in manufacturing from the Institute of Supply Management followed by the Federal government's data on jobs, which marked a decline in non-farm private sector jobs and a rise in unemployment to 5% in December. (Keep in mind, though, that jobs data is notorious squishy and often revised up or down later). Then, big box retailers other than Wal-Mart reported disappointing numbers for December. American Express, whose cardholders tend to be quite affluent, also reported that consumers using its cards slowed spending in December while the number of delinquent cardholders rose. AmEx said the problems were particularly apparent in states such as Florida and California most affected by problems in the housing and real-estate sectors.

The trend in the general economy was reflected in the first same-store sales comparison for December and the third quarter from major restaurant chains. Wendy's reported a small drop of less than 1% in company-owned stores (and a slight rise in franchised comps), but it was the first negative comparison in a year and a half and the Street punished the stock. Starbucks has also recently announced the first same-store sales declines in its history.

Casual dining chains, particularly those positioned at the lower end of the segment, continued to report sagging sales. Brinker and Ruby Tuesday both reported substantial declines in same-store sales for the fourth quarter.

Section sponsored by Manitowoc Foodservice Group

Economists Cut Consensus Forecasts For 2008 Again, Says Blue Chip, As Worry About Recession Increases
With all the drumbeat of negative economic news, it's hardly surprising the more than 50 major economists surveyed monthly by Blue Chip Economic Indicators cut their forecasts of a number of key indicators for '08. And Randall Moore, the executive editor of the newsletter, noted it would have been worse if his respondents had seen the negative jobs numbers reported at the end of the first week of January.

To put the impact of the job numbers in perspective, the Jan. 4 report featured the first actual decline in non-farm payrolls (as opposed to a decline in the rate of growth) since July '03. Not incidentally, July '03 marked the start of the latest expansion of commercial restaurant sales.

While the year-on-year consensus forecast of real growth of gross domestic product held steady at 2.2%, the economists cut their forecasts of GDP growth in every single quarter of this year. They also raised the forecast of the rise of the consumer price index in '08 by 0.2 point to 2.9%. The forecast for personal consumption expenditures remained at a 17-year low of 2.1%.

And while the economists, in their first go at '09, predict next year will see improvement, the forecast is only 2.7% real GDP growth, below the 3% considered "trend."

Moore summed up the general economic mood by noting "If upcoming economic reports mimic the weakness of the latest ISM and Employment data, debate among economists and policymakers is likely to shift from whether the economy is in a recession to whether it will be mild or severe." But as he also said, whether the U.S. economy actually enters recession or muddles through "will only be known in the fullness of time."

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