Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
September 22, 2009

Regulatory Report:
Sponsored by:
Manitowoc Foodservice
Some Broilers May Get Break In San Joaquin
More Twists In San Francisco's Healthcare Case
Three Tries And FOG's In, Not Out
New Utah Bar Laws A Good-News-Bad-News Story
Comment Period On Smart Irrigation Now Open

Industry Report:
Sponsored by:
Hotelex 2010
ASTM To Offer Lifecycle-Costing Webinar Next Week
Checkers Finds New Franchisees, New Locales
Burgerville Hits The Road
Einstein Spreads Wings
Russia To Get First Chili's
Russia To Get First Chili's

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In This Section:
GDP Forecasts Improve, But Not Income, Spending
Menu Prices Continue To Creep Up, As Do Consumer, Producer Prices
Mills, Buyers Continue To Spar Over Metals Prices
Register Now For FER's E&S Market Forecast Webinar Nov. 4

This issue's Regulatory ReportSponsor: Manitowoc Foodservice
Industry ReportSponsor: Hotelex 2010
Economic Report MUFES 2010

By Robin Ashton

GDP Forecasts Improve, But Not Income, Spending

Economists polled in early September by the Blue Chip Economic Indicators newsletter boosted their consensus forecasts for U.S. gross domestic product growth for the rest of this year and next. But forecasts for disposable income and consumer spending—key drivers of foodservice spending—remain weak through next year.

The consensus forecast for third-quarter real GDP jumped 0.8 point to 3%, and the fourth-quarter projection rose 0.1 point to 2.4%. The increases would follow four consecutive quarters of real decline in GDP. The economists also raised their forecast for year-on-year GDP growth next year to 2.4%, up 0.1 point. The forecast for '09 GDP remained at 2.6%.

In contrast, however, the forecast for real disposable personal income growth fell, and the projection for personal consumption spending held steady. The real DPI forecast for '09 fell to 0.8%, a 0.5 point drop from last month's consensus, and is expected to rise only 1.7% next year. PCE is forecast to fall 0.8% in real terms this year and gain only 1.6% in '10.

With unemployment forecast to average 9.8% next year, it looks to be a slow recovery for all retail based businesses, including foodservice.


Section sponsored by MUFES 2010

Menu Prices Continue To Creep Up, As Do Consumer, Producer Prices
The Consumer and Producer Price Indexes both posted modest increases in August, the U.S. Bureau of Labor Statistics reported last week. The CPI rose 0.4%, after being flat in July, with nearly all the gain driven by a 9.1% increase in gasoline prices. Similarly, the overall PPI for "finished" goods gained 1.7%, also driven by a big spike in energy prices, after a decline of 0.9% in July.

Food prices rose in both measures last month, with the food-away-from-home component of the CPI rising another 0.1%

Prices for "finished" food rose 0.4% in the PPI after declining 1.5% in July. For the past 12 months, the overall PPI has fallen 4.3% on an unadjusted basis.

Overall food prices in the CPI rose a mere 0.1% in August. The food-at-home component was flat, following a half-point drop in July. For the 12 months ending August, food-at-home prices fell 1.6% while food-away-from-home prices rose 3%

While the end of the summer driving season apparently led to the run-up in gasoline prices last month, the Federal government's Energy Information Administration reports gas and diesel fuel prices fell in the week ending Sept. 14. Gasoline prices are running $1.26 lower than a year ago, while diesel prices are $1.39 lower.

Section sponsored by MUFES 2010

Mills, Buyers Continue To Spar Over Metals Prices
The steel mills keep trying to raise prices, and the buyers, including those purchasing material for foodservice equipment and supplies, keep pushing back, according to reports from Purchasing magazine and elsewhere.

Prices for aluminum, copper and zinc also have moved higher during the past few months, though in some cases, speculators are pushing prices up.

ArcelorMittal last month led a host of other steel suppliers in announcing substantial increases for November hot-rolled sheet. But according to Purchasing Executive Editor Tom Stundza, slack capacity utilization and weak demand continue to undercut the suppliers' attempts to capture the price increases. According to the magazine's "Steel Flash Report" published in late August, "The average price for a baker's dozen of steel mill products…increased only 3% in August, following a 4% increase in July." Both increases followed prices hitting a cyclical low in June. The overall steel index remains 47% below the cyclical peak in the summer of 2008. And because steel makers are using only 60% of their capacity, the makers themselves help push down prices as they bring capacity back into production.

Anecdotal reports from E&S manufacturers have many seeing metals suppliers trying to raise prices for the main stainless and carbon grades. As in other markets, they are doing their best to push back.

This supply-demand conundrum is affecting other materials as well. Recent reports also have aluminum prices increasing nearly 40% on the London Metals Exchange spot market this year, despite a drop in worldwide demand of nearly 10%, according to a report from Barclays Capital in London. Copper and zinc prices have also seen big run-ups, in part because traders keep anticipating increased demand.

Purchasing forecasts only moderate increases for most metals through the end of this year and into next.

Section sponsored by MUFES 2010

Register Now For FER's E&S Market Forecast Webinar Nov. 4
Figuring out what's going on in the foodservice equipment and supplies market is essential to your future. So get registered now for the annual forecast Webinar hosted by Foodservice Equipment Reports.

FER Publisher Robin Ashton and forecasting partner John Muldowney, principal of Clarity Marketing, Tipp City, Ohio, will present a revised version of the FER forecast for 2010 through a Web-based seminar Nov. 4, to begin at 1 p.m. Central Standard Time. The presentation will run about an hour and 15 minutes and will provide an overview of general economic, operator and materials-pricing trends, historical E&S pricing trends from AutoQuotes Inc. and the magazine's hard-number forecasts of nine separate E&S product categories for both '09 and '10.

All participants will also receive an updated version of the entire six-section forecast in PowerPoint format, including an overview of the Top 150 E&S manufacturers from Muldowney.

The seminar fee is $349. Those who have attended the FER forecast or other FER meetings, or have purchased the forecast in the past, will receive a discount. Those who attended the forecast seminar in August this year can attend the seminar and receive the updates for no charge.

If you can't wait until November, the current forecast package, presented at the magazine's annual forecast seminar Aug. 5, is available in six PowerPoint decks for $449. To order or for information on participating in the forecast webinar, e-mail Robin Ashton at or Chris Palmer at, or call the magazine at 800/986-9616.

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