Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
June 16, 2009

Regulatory Report:
Sponsored by:
Manitowoc Foodservice
SoCal Setting New Charbroiler Rules
Food-Safety Bill Foments Food Fight In D.C.
Legislators Add Water To Clean-Energy Mix
Maui Moves To Make Clamshells As Scarce As Clams
Calorie Counts On Menu In Oregon; Connecticut Next?
Kentucky To Update 30-Year-Old Food Code

Industry Report:
Sponsored by:
Server Products
Elevation Burger Spreading Wings
P.F. Changís Expands To Mexico
Join FER On New Facebook, LinkedIn Pages
Industry Mourns Brinker Founderís Loss
Excellís Flores Passes

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In This Section:
Most Economists Think Worst Is Over But Recovery Will Be Slow
Menu-Price Increases Offsetting Falling Traffic
Food, Energy Prices Edge Up; Most Metals Prices Still Bottoming
Times Are Tough! Take Advantage Of The Early-Bird Deal OnFER's President's Preview Forecast Seminar

This issue's Regulatory ReportSponsor: Manitowoc Foodservice
Industry ReportSponsor: Server Products
Economic Report FETCO Corp.

By Robin Ashton

Most Economists Think Worst Is Over But Recovery Will Be Slow

More evidence that the worst economic downturn in decades may finally be turning: Most economists forecasting the general economy predict gross domestic product will record real growth in the third or fourth quarter 2009, following four straight quarters of decline.

In the June survey of more than 50 leading economists by Blue Chip Economic Indicators, 95% of those surveyed believe the recession will be over by the end of the year. Nearly 60% believe the third quarter will bring the first positive U.S. GDP number since the second quarter of '08.

The consensus forecasts for real GDP growth for both '09 and '10 rose 0.1 point in the latest survey, to -2.7% and +2% respectively. Those surveyed also raised the quarterly forecasts for the third and fourth quarters of this year to 0.6% and 1.9%. Real GDP plunged to -6.3% in fourth-quarter '08, and fell to an only slightly better -5.7% in the first quarter this year. The forecast for the second quarter is -1.8%.

But nearly all the economists surveyed also believe the economy will recover sluggishly. Despite the better-than-expected jobs report for May—the economy shed 345,000 non-farm jobs, an improvement from an average of 691,000 per month in the first quarter—the consensus believed the job losses will continue through first-quarter '10, with unemployment peaking at 10.1%.

Also, the group indicated it believes consumer spending will remain very weak through next year. While personal-consumption expenditures are expected to turn positive in the third quarter, overall PCE for the year is still forecast to be down 0.7% in real terms this year and grow only 1.8% next.


Section sponsored by FETCO Corp.

Menu-Price Increases Offsetting Falling Traffic
At least through April, a majority of operators continued to experience falling traffic counts. But aggressive price increases have helped many to hold their own on overall sales.

Sixty percent of operators surveyed in April by the National Restaurant Association for its monthly Restaurant Performance Index said same-store sales were down compared with April 2008. And according to NPD Group, as reported in Nation's Restaurant News, traffic fell 2.2% in March compared to year-earlier levels, the sixth decline in seven months.

But despite food and energy prices that have been falling until just recently, many restaurateurs have continued to raise menu prices to make up the difference. The Bureau of Labor Statistics reported menu prices rose a seasonally adjusted 0.3% in April. In contrast grocery-store prices fell 0.6%, their fifth consecutive monthly drop. Overall food-away-from-home prices increased 4.6% in the year ending in April, BLS reported. NPD said check averages were 2.2% higher in March than the year prior, offsetting the traffic decline.

Quickservice restaurants, noncommercial operators and vending have been the most aggressive sectors, with price increases exceeding 5% the past year. Fullservice restaurants have been more constrained, with an annual gain of 3.7%, though their April increase was 0.4% seasonally adjusted, twice that of quickservice.

Section sponsored by FETCO Corp.

Food, Energy Prices Edge Up; Most Metals Prices Still Bottoming
Wholesale food prices rose 1% in April, and gasoline was nudging $3/gal. in some parts of the country the first week of June, adding to evidence that some core commodities have apparently bottomed out and are moving higher. On the other hand, there is still substantial downward pressure on many metals and other commodities commonly used in foodservice equipment and supplies.

The rise in food prices, as charted by the "all foods" computation of the Bureau of Labor Statistics Producer Price Index, was the first increase in wholesale prices since September 2008. During the six months October through March, food prices fell at least 0.5% a month, and overall fell 6.9%.

Gasoline prices have been pushed higher by several factors. The price of oil hit a seven-month high in early June and is now trading around the $65/barrel range. And the market is also experiencing the normal increases driven by the switch to more ozone-friendly summer fuel blends and increased summer driving. The U.S average price for the week ended June 8 was a $2.624/gal., up 10 cents from the previous week and nearly 80 cents higher than the January average. Still, gas costs $1.42/gal. less than a year ago at this time.

Metals-pricing trends, on the other hand, remain very restrained, according to Purchasing magazine, Prime Advantage and other sources. With U.S. stainless-steel consumption off 8% last year and on track to fall another 13% this year, according to Purchasing, mills have slashed production worldwide. But that still has not helped prices rebound. With equally drastic declines in use of carbon based steels, prices still have not bottomed out. Most hot- and cold-rolled products are selling for $400 to $490 a ton, less than half their year-earlier prices.

Aluminum-ingot prices have begun rising again, after hitting bottom in March, and copper prices took an unexpected jump in late May and early June, driven by speculators fleeing the falling U.S. dollar. But most analysts said they expect prices of the metals to fall back or remain restrained.

Section sponsored by FETCO Corp.

Times Are Tough! Take Advantage Of The Early-Bird Deal OnFER's President's Preview Forecast Seminar
Early-bird registrants to Foodservice Equipment Reports 2010 E&S President's Preview Market Forecast meeting just get the worm. They save $100 off the seminar fee and get the peace of mind that they'll be prepared for the coming budget season. The meeting is scheduled for Wed., Aug. 5, at the Hotel Orrington, Evanston, Ill. To earn the early-bird discount, attendees much register by June 26.

The program will kick off with an open forum of leading multiunit operators discussing the challenges facing their businesses. Then, John Muldowney, principal at Clarity Marketing, Tipp City, Ohio, will join FER Publisher Robin Ashton in analyzing general economic, operator and materials-price data. Muldowney will also update his listing of the top 150 E&S manufacturers and review their performance in '08. Michael Greenwald, president of AutoQuotes Inc. will present exclusive information on equipment and supplies manufacturer-pricing trends. The meeting will close with Ashton and Muldowney offering hard-number forecasts of the E&S market for '10. Attendees receive all data in both print and electronic formats.

The meeting, scheduled from 9:30 a.m. to 4 p.m., has been planned so many in the Eastern and Midwestern United States can fly in and fly out on Aug. 5. Cost of the seminar is $845 until June 26, $945 after. For agenda, hotel and registration information, go to or contact Chris Palmer at 847/336-2049.

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