Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
March 8, 2005

Regulatory Report:
Sponsored by: APW Wyott Innovations

Dark Skies Ahead For Hailey, Idaho
Rhode Island Inspections Go High-Tech
Smoking Bans Spreading—Today Rhode Island, Tomorrow…The Nation?
School Wellness Policy Could Spread ‘No-Fry’ Zones

Industry Report:
Sponsored by: Customer Choice Dealer Awards

Pentair, Ecolab Form Alliance
New Digs, New Kitchens For Chef In Training At Kendall
Caribou Eyes 100 New Stores For 2005
ACFSA Founder Al Richardson Passes
FEDA Doings During NAFEM
Lighting Calculators Illuminate True Costs

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In This Section:
Jobs Post Strong February Growth As Consumer Sentiment Dips
Some Light On Horizon For Stainless, Copper Prices
NRA Performance Index Falls Back From Record High
Blue Chip Economists Foresee ‘Measured’ Interest Rate Increases

This issue's Regulatory ReportSponsor: APW Wyott Innovations Industry ReportSponsor: Customer Choice Dealer Awards

Industry Report Sponsored by Hatco Corp.

Jobs Post Strong February Growth As Consumer Sentiment Dips
After months of moderate job growth, nonfarm payrolls grew strongly in February. The U.S. Labor Department reported March 4 that businesses added 262,000 news jobs in the month, well ahead of most analysts’ expectations. While services sectors led the surge, construction and manufacturing also added net jobs.

The Labor Department revised down the totals for January to 132,000, but revised up the December estimate, leaving a net increase of 8,000 for the two-month period. The unemployment rate, charted by a separate survey, rose to 5.4% from 5.2% in January, as more people sought jobs.

While the numbers for February are positive, the labor-force participation rate remains at 65.8%, its lowest level since 1988. Economists expect more people to enter the market as the jobs situation improves.

Separately, the University of Michigan reported that both its widely followed Index of Consumer Sentiment and Index of Consumer Expectations declined slightly in the February survey. Sentiment fell to 94.1 from 95.5, and Expectations were down to 84.4 from 85.7. Surveys of Consumers Director Richard Curtin said that while the reading "hardly changed the positive level of confidence that still prevails," consumers are concerned about the sluggish pace of job growth.


Section sponsored by Hatco Corp.

Some Light On Horizon For Stainless, Copper Prices
Market forces are beginning to take some pressure off pricing of stainless steel and copper, according to Tom Stundza, executive editor of Purchasing magazine.

A combination of higher inventories at service centers, buyers switching to non-nickel based alternatives and a manufacturer activity reaching a plateau has led to slight declines in short-term stainless prices, said Stundza.

Negotiated contract prices recorded in late February for April and early March delivery are off $200 to $300 a ton. And service center inventories of stainless are 19% ahead of last year at this time. "There’s been some slippage of stainless prices," Stundza said, "particularly in North America."

On the other hand, the longer term outlook is less certain. "Because stainless is used by so many diverse industries, there is no clear buying leader to drive the market," he said. "It’s still a market in search of a direction." He expects stainless prices to remain historically high through the end of the year, though incremental drops are likely.

Copper prices should, however, begin to fall rapidly over the next few months, he predicted. "The speculators are driving copper at the moment," he said. When currency markets are in turmoil, as they are now, money speculators often shift briefly to non-ferrous metals, driving prices in aggressive spikes and troughs. "Late last year, it was nickel," Stundza said. "In the past few months, it’s been copper." But the speculators seldom stick with one metal for long, seeking another material to drive, so it is likely the pressure will come off copper soon, leading to a rapid decline in prices.

Detailed information on transaction pricing, forecasts and other data on hundreds of materials and components is available for sale at, the Web site maintained by Purchasing magazine.

Section sponsored by Hatco Corp.

NRA Performance Index Falls Back From Record High
The Restaurant Performance Index fielded by the National Restaurant Association fell back somewhat in January from its record high in December. But at 101.7, down from 103.1, the Index remains at a level indicating positive growth for the industry in coming months.

Of significant note, the NRA has, as of January, rebased the historical and current Index values, so that 100 indicates the tipping point between expansion and contraction.

Both the Current Situation and Expectations Indexes fell in January, though the former showed the stronger decline. Led by drops in same-store sales and traffic, the Current Situation Index was off 2.2 points to 100.1. The capital expenditures indicator was off only 0.5 point, the least of the four Current Situation components.

The Expectations Index as a whole fell only 0.6 point to 103.4. It remains above the average seen last summer and fall. The capital expenditure component, an indication of plans to purchase equipment and supplies over the next six months, was off 1.2 points in January to 102.5.

Section sponsored by Hatco Corp.

Blue Chip Economists Foresee ‘Measured’ Interest Rate Increases
Leading economists expect the Federal Reserve to raise the Federal Funds interest rate five more times in 2005, ending the year at a 3.75% rate. The rate currently stands at 2.5%, following another quarter-point increase declared at the Federal Open Market Committee meeting Feb. 1-2.

But the economists, polled monthly for Blue Chip Financial Forecasts newsletter, are concerned that inflation may begin to rear its ugly head, leading the Fed to raise rates more aggressively than the "measured" pace it has kept since last year. In the past few months, both the price index used to deflate Personal Consumption Expenditures and the Producer Price Index have shown some of the biggest increases in core rates since 1995. If these increases get passed through to consumers, the economists expect the Fed to take note and adjust their pace accordingly.

Stronger than expected growth in real gross domestic product in the fourth quarter '04 and anticipated stronger than forecast growth in the first quarter this year may also affect any Fed reevaluation of the pace of interest rate increases. The fourth quarter GDP number was revised to 3.8% from the previous 3.1% in the latest estimate. Based on reported consumer and business spending trends, the first quarter ’05 may come in closer to 4.0% than the forecast 3.5%.

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