Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
May 16, 2006

Regulatory Report:
Sponsored by:
Franke Foodservice Systems
EPA To Unveil Draft Energy Star Dishwasher Specs At NRA Show Meeting
Comment Period Now For Alaska Food Code Change
Doggie Dining Up To Governor
Kansas Restaurant Inspections Now Online
Louisiana Senate Okays Smoking Ban; New Jersey Scraps '25-Foot' Rule

Industry Report:
Sponsored by:
HOSFAIR Guangzhou & HOSFAIR Xi'An 2006
Tour With FER Fortnightly At NRA Show's KI Pavilion
NRA To Debut New ServSafe Edition At Show
Dei Dolori Promoted To Group President At Middleby
FCSI Names Legge New Executive Director
MAFSI, FEDA Offer Upcoming Seminars
ITW Names McDonough President, Food Equipment Group-North America

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In This Section:
AutoQuotes: E&S Average List Prices Up 4.7% Last Year
MAFSI Barometer Pegs E&S Sales Up 2.7% For First Quarter
Operators Continue To Report Moderately Strong Growth
Blue Chip Holds 2006 U.S. GDP Forecast; Interest Rates Rise Again

This issue's Regulatory ReportSponsor: Franke Foodservice Systems Industry Report
Sponsor: HOSFAIR Guangzhou & HOSFAIR Xi'An 2006

Economic Report FER E&S Economic Forecast Meetings

AutoQuotes: E&S Average List Prices Up 4.7% Last Year
If it seemed like you paid more for your equipment and supplies last year, you're right. Published prices for 257,311 models of E&S rose an average of 4.7% for the year ended March 31, according to an analysis of AutoQuotes extensive database of list prices. The database covers products from 310 manufacturers.

The prices are those received and published by AutoQuotes and are "asking" prices that do not reflect "deviated" pricing structures for dealer buying groups, chain operators and other large buyers.

"Price increases over the last 12 months were stronger than I expected," AutoQuotes Pres. Kent Motes told FER Fortnightly. Fabricators, cooking equipment manufacturers and plastic smallwares suppliers showed some of the biggest price gains, as they attempted to cover the squeeze on their margins caused by rising costs of core materials, including stainless steel and plastic resins.

As we reported last issue, those material costs have been on the rise again in recent months. (See FER Fortnightly's May 2 issue by clicking here Aluminum and copper, both used extensively in refrigeration and other equipment products, are running at historical highs. And the increasing cost of crude oil and natural gas is keeping upward pressure on plastics.

Motes added that a significant number of companies raised prices more than once during the period, leading to double-digit increases for some.

Still not everyone was inclined or able to push prices higher. The median increase—with 155 companies below and 155 above—was a smaller 3.7%.

With the continuing materials cost pressures, as well as increasing cost increases for packaging and freight, it's likely some manufacturers will opt for a second round of increases later this year.


MAFSI Barometer Pegs E&S Sales Up 2.7% For First Quarter
Sales growth of foodservice equipment and supplies moderated in the first quarter, according the latest reading from the Manufacturers' Agents Association for the Foodservice Industry's quarterly Business Barometer.

Overall sales increased 2.7% for the period ended March 30, compared to a very robust 3.8% in the fourth quarter of 2005. The overall number was dragged down by weak performance in the Northeast for all product categories save tabletop. Sales growth in both equipment and supplies in the Northeast were reported at less than 1% for the quarter.

Overall first-quarter growth last year also came in at 2.7%. All numbers reflect reports on sales for like lines and are nominal—not inflation adjusted—figures.

Sales of equipment for the quarter just ended rose 2.6%, supplies and tabletop 2.8% each and furniture sales rose 3%.

The other four regions, including the Midwest, which has lagged in recent quarters, showed moderately strong growth.

Section sponsored by FER E&S Economic Forecast Meetings

Operators Continue To Report Moderately Strong Growth
It seems remarkable, given the latest run-up in gasoline prices, but operators continued to show healthy sales and traffic gains through March and for the first fiscal quarter of 2006.

The latest data from the National Restaurant Association's Restaurant Performance Index, Technomic Inc.'s chain same-store-sales tracking and the U.S. Census Bureau reports of U.S. Eating and Drinking Place Sales all tell the same tale: Sales and traffic are up in the first quarter versus last year, when things were also healthy.

The NRA's March overall RPI rose to a 150-month high of 102.5. Any reading above 100 indicates expansion. The Current Situation component of the RPI reflected strong gains in same-store sales, traffic and capital expenditures during the past three months, while current capital expenditures also are up 1.4 index points for the period, to 100.8. The Expectations Index, however, was flat, with the index for anticipated capital expenditures off 0.2 point, at 102.6. Those surveyed do expect same-store sales to continue to grow during the next six months.

Technomic's weighted average change of same-store sales popped back over 2% in March, after falling to just over 1% in February, following a very robust nearly 5% gain in January. The Technomic index does not include McDonald's, which last week reported a 4.1% gain in U.S. same-store sales in April. These are nominal growth numbers.

The Census Bureau, meanwhile, on May 11 reported seasonally adjusted nominal growth of Eating and Drinking Place Sales at 6.8% in April. Technomic calculates seasonally and inflation adjusted growth of 5.9% in March and 4.4% on a 12-month moving average through March.

So overall, going into the summer, it appears the double whammy of higher gasoline prices and rising interest rates has yet to undercut the nearly three-year expansion of foodservice.

Section sponsored by FER E&S Economic Forecast Meetings

Blue Chip Holds 2006 U.S. GDP Forecast; Interest Rates Rise Again
The forecast for growth of real gross domestic product during 2006 remains at 3.4%, according to the consensus of more than 50 leading economists surveyed monthly by Blue Chip Economic Indicators. Although the economists acknowledged higher-than-expected growth in the first quarter, they still predict the general economy will cool in later quarters this year.

As for inflation and personal consumption, the consensus has raised its forecasts for both over the past few months. The latter changes reflect the effects of higher energy costs and stronger than anticipated consumer spending. The forecast for the annual Consumer Price Index is now 3.1%, up from 2.9% in the January forecast. Personal consumption is now forecast to rise 3.3% real, a half-point hike from January's forecast. The stronger spending pattern is reflected in foodservice sales (see article above.)

Also as anticipated, the Federal Reserve Bank Open Market Committee raised the Federal funds rate one-quarter point higher May 10 to 5%. To the chagrin of the financial markets, the Fed, in making the announcement, openly said it couldn't predict whether more rates hikes will be needed. Many major banks responded to the change by raising their prime rate to 8%.

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