Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
October 18, 2005

Regulatory Report:
Sponsored by:
APW Wyott
Comments Sought For Proposed NFPA 96 Change
FDA 2005 Model Food Code Revises Standards
Three Cities Feel Their Way Through FOG Issue
ICC Mandates Hood Interlocks Despite Foodservice Protests
Managers Now Need Safety Certification In KY Counties

Industry Report:
Sponsored by:
MUFES '06,
Feb. 11-13, 2006

Energy Star Looking To Recognize Small Businesses Saving Energy

17,000 Ops Kick In For 'Dine For America' Katrina Aid
Hobart, Vent Master Take Home FCSI Awards
Cleveland Range Past Pres. Lovejoy Passes
Gill Marketing Moves To New Quarters
FCSI Honors Design, Management Consulting Winners

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In This Section:
Some Commodities Spike; Outlook For 2006 Mixed
NRA's Performance Index Takes A Hit
Economists Mostly Shrug Off Hurricanes' Effect

This issue's Regulatory ReportSponsor: APW Wyott Innovations Industry ReportSponsor: MUFES '06, Feb. 11-13, 2006

Economic Report Hatco Corp.

Some Commodities Spike; Outlook For 2006 Mixed
Transaction prices for key materials used in foodservice equipment and supplies are forecast to jump in the fourth quarter of 2005, according to the latest forecasts from Purchasing magazine's

But while the organization reports its Commodity Price Index reached a record high in September, it expects prices for many materials to moderate in '06 as the short-term effects of hurricane-related disruptions are absorbed.

There are exceptions however. Most steel prices are forecast to jump in fourth quarter, then moderate through '06. But stainless, the most widely used material in foodservice equipment, is following a different trend. Transaction prices have actually moderated since reaching a high of $2,557 a net ton in the second quarter of '05. The forecast for the fourth has prices at $2,350 a ton. But the forecast is for prices to trend back toward $2,500 a ton though '06.

Energy and plastic prices not only have spiked, but are forecast to remain stubbornly high through next year. Natural gas prices, which averaged $7 a thousand cubic feet at the beginning of '05, are pegged at $10.55 in the third quarter and expected to reach $10.74 in the fourth. Prices next year will gradually moderate but remain above $8.

Smallwares makers have been especially hard hit by the jump in plastic resin prices. Extrusion-grade LDPE has risen from 73 cents/lb. in the second quarter to a forecast 86 cents in the third. Prices for most of '06 are forecast to remain near 90 cents a pound.

Prices for other materials, including aluminum, brass, copper and corrugated, are more stable or actually forecast to decline slightly. Lumber prices, in spite of the need for building materials in the Southeast, are expected to remain relatively stable.

The bottom line is that the upward pressure on prices of foodservice equipment and supplies will remain constant well into next year.


Section sponsored by Hatco Corp.

NRA's Performance Index Takes A Hit
Hurricanes and gas prices finally caught up with the Restaurant Performance Index fielded by the National Restaurant Association in September. Clipped by a substantial drop in optimism about the future, the overall Index fell 1.2 points to 100.4. But while the drop is no doubt significant, the Index remains above 100, the tipping point for expansion/contraction.

NRA called the decline "expected," given the double-whammy of record high gasoline prices and two major hurricanes. But the downturn does emphasize a gradual softening in operator traffic, sales and expectations that appeared throughout summer and early fall.

The Current Situation Index fell a moderate 0.6 point, with the largest drop in the four-component measure a 1.2-point decline in capital expenditures during the past three months. Three of the Current Situation Index components stand at 99.9.

Expected business conditions took the biggest hit, down 2.7 points, in the Expectations Index, which overall was off 1.8 points. Capital expenditures during the next six months declined 1.5 points.

The drop in the NRA Index mirrors that of other consumer-sensitive measures. The University of Michigan's Index of Consumer Sentiment registered a record decline in September, down nearly 12 points. The Consumer Expectations Index also registered a big drop. The simple reason: high gas prices.

Section sponsored by Hatco Corp.

Economists Mostly Shrug Off Hurricanes' Effect
Not everyone believes the sky is falling. While high gas prices and hurricanes are clearly affecting consumers' moods, most leading economists expect the overall impact on the general economy to be minimal. The latest consensus forecast from economists polled by Blue Chip Economic Indicator has real growth of gross domestic product for all of 2005 remaining at 3.5%, though growth is forecast to be only 2.9% in the fourth quarter. The consensus forecast for '06 actually rose 0.1 point to 3.3%.

Annualized quarterly growth is forecast to be 3.4% in the first and second quarter next year, 3.2% in the third and fourth quarters.

The economists point to a great deal of economic resilience outside the Gulf Coast. They note that employment and consumer spending are performing much better than expected. Several manufacturing surveys were positive. And while business spending slowed in the third quarter, part of that was a result of the month-long Boeing strike.

Disposable personal income is forecast to show 3.3% real growth in '06, up substantially from the predicted 1.9% growth in '05.

While inflation remains a worry, the core rate, minus energy and food, is up only 2.0% this year. The overall Consumer Price Index is forecast to reach 3.3% for '05 but drop back to 2.9% in '06.

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