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In This Section:
As Expected, Fed Boosts Interest Rates Quarter-Point AsBlue Chip Economists Forecast Strong GDP Growth
FER Raises 2004 E&S Market Growth Forecast
Public E&S Companies Report Robust First Quarter 2004 Growth
Big Chains Lead Market As NPD Reports Foodservice Grew At Fastest Rate Since 2002
NAFEM, MAFSI Indices Show E&S Growth 1st Quarter 2004
Consumer Sentiment, Expectations Show Strong
Gains In Latest University of Michigan Survey
This issue's Industry Report Sponsor: Bunn Corp. | Regulatory ReportSponsor: ES3
 
As Expected, Fed Boosts Interest Rates Quarter-Point As
Blue Chip Economists Forecast Strong GDP Growth
The Federal Reserve Bank raised its key short-term interest rate a quarter point to 1.25% at its meeting June 29-30, as widely expected by most economists, including those polled by Blue Chip Economic Indicators. Fed officials also telegraphed that they will raise rates throughout the year, in "measured," controlled fashion. The Blue Chip consensus expects another two or three quarter-point increases by year’s end.
While the higher rates will raise the cost of borrowing money for chains and other foodservice operators, the move is seen by many economy watchers as a validation that an economic recovery is now well underway. The Blue Chip group currently forecasts real growth in gross domestic product (GDP) will rise to 4.7% year-to-year for 2004, the fastest rate of growth since 1984. The forecast for ’05 dropped 0.1 of a point to 3.7% year-to-year.
FER Raises 2004 E&S Market Growth Forecast
With upbeat indicators all around, Foodservice Equipment Reports has revised upward its 2004 forecast for growth of equipment and supplies manufacturers’ sales. Led by strong growth of primary cooking and refrigeration categories, as well as a jump in supplies and tabletop sales, overall real growth is now expected to reach 2.5% for the year. This compares with positive growth of 1.9% for the industry as a whole forecast in the April revision. Nominal growth, that including price increases, is predicted to reach 4.2% for ’04. (For full analysis click here.)
"The major E&S players saw very strong growth in the first quarter of 2004," says FER Publisher Robin Ashton. (See related story). "With operator sales showing continued growth in most segments and regions, boosting confidence, we see the overall market improving throughout the year."
In the current revision, primary cooking equipment is slated to grow 3.8% real, with refrigeration pegged at 3.5%. Only furnishings and custom fabrication remain in negative real territory. Overall, equipment is forecast to grow 2.3% and supplies and tabletop 3.1% for the year in real terms.
Section sponsored by DI Foodservice Cos.
Public E&S Companies Report Robust First Quarter 2004 Growth
Strong gains were on the ticker as 10 major public foodservice equipment and supplies companies reported first quarter 2004 sales and profit, says John Muldowney, principal at Clarity Marketing, Tipp City, Ohio. While the numbers are skewed upward somewhat by two acquisitions, the results are strong by any measure. With the 10 companies’ results blended, they showed sales gains of 9.5% vs. the same quarter in 2003. Even discounting for Standex’s acquisition of Nor-Lake and Carlisle’s picking up Flo-Pac, gains were probably 7% to 7.5%, Muldowney estimates. Gross operating profits and margins also improved.
The six equipment companies in the mix saw sales rise 8.5%, including acquisitions. The four supplies and tabletop companies’ sales rose a whopping 11.4%.
For the complete report, including details on individual companies, contact Muldowney at jmuldowney@claritymarketing.com.
Section sponsored by DI Foodservice Cos.
Big Chains Lead Market As NPD Reports Foodservice Grew At Fastest Rate Since 2002
With a 0.8% traffic gain and slightly rising check average, dollar growth at restaurants grew at a robust 2.7% during the Winter Quarter ending in February, according to NPD Foodworld. And the Chicago-based research service says growth accelerated through the period, with the strongest gains seen in February. Quick service and casual dining led the charge.
As has been apparent since the operator recovery began last summer, big chains continue to be the growth winners. Versus the same period in 2003, major chains saw traffic growth of 4%, while traffic at smaller chains fell 2% and that at independents was off 3%. Major chains account for about half of all industry traffic.
Other findings from the Winter Quarter include a gain in every single main meal period. Only late-night snacks were off in the quarter. And for the first time in many quarters, there was a reversal in on-premise vs. off-premise traffic. On-premise traffic, led by visits to full-service restaurants, showed a 2% gain, while off-premise occasions were flat. Off-premise traffic accounts for 58% of the market.
NAFEM, MAFSI Indices Show E&S Growth 1st Quarter 2004
The equipment and supplies market improved in the first quarter of 2004, according to sales indices from both the North American Association of Food Equipment Manufacturers and the Manufacturers’ Agents Association for the Foodservice Industry. Export sales growth for NAFEM companies participating in that group’s index remained negative, however.
In the NAFEM Quarterly Index, North American sales rose 2.5% vs. the previous quarter, while export sales were down 6.8%. A year ago first quarter, North American sales were off 4.2% while export sales dived 16.3%. The gains do not factor out price increases.
MAFSI’s Business Barometer, derived from reports of sales of like lines from member firms, was up 1.2% overall vs. the first quarter ’03, with equipment, supplies and tabletop each recording 1.2% gains. Furniture sales rose 0.6%. MAFSI’s Barometer showed the strongest growth in Canada and the South. The Midwest was off 0.3%.
The reps forecast a bullish second quarter with sales rising 2.5%.
Section sponsored by DI Foodservice Cos.
Consumer Sentiment, Expectations Show Strong Gains In Latest University of Michigan Survey
Both consumer sentiment and consumer expectations rose sharply in the June Survey of Consumers released June 25 by the University of Michigan. Fueled by continuing jobs growth and moderating inflation expectations, the consumer readings support forecasts of continued strong consumer spending in the months ahead, according to Richard Curtin, director of the surveys.
The Sentiment Index jumped to 95.6, up from 90.2 in the May Survey. The Index read 89.7 in June 2003. The Expectations Index, a component of the Index of Leading Economic Indicators, rose to 88.5, a strong gain over May’s 81.6 reading.
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