Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
September 28, 2004

Industry Report:
Sponsored by: Lakeside Mfg.

FCSI Names Six Award Winners
McDonald's Tests McDelis
'Less Is More' In Portion Sizes, Study Finds
Panchero's Eyes Nationwide Growth
Applebee's Ups Growth Plans
Overtime Battle Rekindles

Regulatory Report:
Sponsored by: ES3

Texas Schools A No Fry Zone
Kansas Shuffles Inspection Duties
Oregon Offers Recourse In Disputes
Pennsylvania Requires Certified Food Handlers
St. Paul Mayor Says 'Butt Out,' County Says 'Butts Out'

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In This Section:
FER Takes First Cut At 2005 E&S Forecast
Blue Chip Consensus Pares '04, '05 Forecasts
Fed Raises Interest Rates Again; Oil Prices Spike Again

This issue's Industry Report
Sponsor: Lakeside Mfg. |  Regulatory ReportSponsor: ES3

Economic ReportSponsored by MAECO

FER Takes First Cut At 2005 E&S Forecast
In spite of some recent industry wobbles, Foodservice Equipment Reports estimates manufacturers’ sales of equipment and supplies will grow 3.2% in real terms in 2005. This compares with FER’s current forecast of 2.5% real E&S growth for this year.

"The fundamentals remain quite healthy," said FER Publisher Robin Ashton, who produces the forecasts with assistance from John Muldowney, Clarity Marketing. "Operator sales remain strong, even with gas price increases and other jolts to the general economy. John and I believe rising employment and disposable income, increasing business and leisure travel, and the normal cycle of foodservice capital spending bode well for sales in 2005. In fact, we are being cautious at 3.2%. There are many positive factors going into next year."

The market for foodservice equipment and supplies usually progresses in three cycles, or waves, Ashton said: Chains [begin a market cycle] first, smaller chains and independents second and the noncommercial "spec" market last. "We’ve really only seen the first third of the cycle," he says. "There remains a great deal of pent-up demand in the street and spec segments."

But Ashton also points out manufacturers are under great pressure to raise prices. Price inflation will almost certainly range 3-4% next year thanks to rising materials and benefit costs.

FER’s detailed forecast of the market will be presented at the Equipment & Supplies Strategic Summit—ES3—Oct. 25-26, 2004, at the Westin Casuarina, Las Vegas. For information on the full program and registration information, click here.

Section sponsored by MAECO

Blue Chip Consensus Pares ’04, ’05 Forecasts
A ramp up in inflation, particularly oil and gasoline prices, has led leading economists to cut their forecasts for real economic growth for the remainder of 2004 and for ’05.

Writing in the Sept. 10 issue of the Blue Chip Economic Indicators newsletter, Executive Editor Randall Moore synthesized the reasons: "The sharp upward spike in energy prices has helped cap real growth in personal incomes and dampened consumption, especially among lower and middle income households."

The consensus forecast for real growth of gross domestic product (GDP) is now 4.2% for ’04 and 3.6% for ’05. Earlier in the year, the economists’ consensus pegged real GDP growth at 4.7% for this year and 3.8% for next. The forecast for third quarter ’04 growth is now 3.5%, down a half-point from a month ago.

The economists do assume oil prices will stabilize and then fall the rest of this year into next. Such a decline would help boost disposable personal income and personal consumption, they say. But recent trends once again have oil prices on the rise. (See related story below.)

Section sponsored by MAECO

Fed Raises Interest Rates Again; Oil Prices Spike Again

As expected, the Federal Reserve Bank raised key interest rates another quarter point at its Sept. 21 meeting. The Federal Funds Rate now stands at 1.75%, up from 1.0% in late June.

The central bank also signaled it might raise rates again when its board meets in November. Such a move has been widely expected in light of rising inflation and another round of spiking oil prices. During the week of Sept. 20, oil price futures again approached $50 a barrel. Personal consumption is particular sensitive to jumps in gasoline prices, especially among lower and middle-income families.

In a special question in its Sept. 10 issue, a majority of economists polled for Blue Chip Economic Indicators said they expect another hike in November and a rise of 1.5 additional points through 2005. That would leave the Federal Funds Rate at 3.5% by the end of 2005.

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