Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
October 23, 2007

Regulatory Report:
Sponsored by:
U.S. House Could Make Quicker Depreciation Permanent
California Air Quality Plans Target Charbroilers
California Lowers Hurdles To Solar Conversion
NYC Says Gas Heaters Okay For Patios
Georgia Food Code Changes Take Effect Dec. 1

Industry Report:
Sponsored by:
Server Products
Cassin, Cartwright Honored At NAFEM Show
Follett, Sterilox Win FCSI Innovation Awards
Kendall College Wins FCSI 'Green Award'
Foodie Connection Donates $10K To America's Second Harvest/Atlanta Food Bank
IFMA Names LaBatt, Martin Bros. Award Winners

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In This Section:
Heard In The Aisles: Market Upbeat At NAFEM Show
Economists Cut 2008 GDP Projection Again
Jobs Data Revised Upward, Inflation Remains Restrained But Consumer Sentiment Dips
And How About The Long Term? Economists Launch Five-Year Forecasts

This issue's Regulatory ReportSponsor: Enodis
Industry ReportSponsor: Server Products
Economic Report Manitowoc Foodservice Group

Heard In The Aisles: Market Upbeat At NAFEM Show
It's time for the anecdotal evidence. The market for foodservice equipment and supplies remains very healthy, according to conversations we had with manufacturers, dealers, consultants and operator buyers during The NAFEM Show held in Atlanta Oct. 11-13.

While there is some concern about the availability of credit, particularly from smaller chains and those that supply them, most everyone exhibiting at the show was impressed by the number and quality of attendees—and their purchase plans.

"Chains may be building fewer new units," one chain-oriented dealer told us, "but they are making up for it with aggressive remodel programs that impact the back of the house as well as the front."

Larger chains feel the credit crunch mainly in pending mergers and buyouts. "We fund our capital budgets out of cashflow," one major chain buyers told us. "Credit is not an issue."

Consultants and the bid dealers that serve them appear particularly busy. One consultant, a past president of Foodservice Consultants Society Int'l., said he could barely afford the time to come to the group's annual meeting. He spent half a day at the show and then headed home. Schools, colleges and eldercare are particularly hot segments, he said.

Many exhibitors told us this NAFEM show was the best in years, maybe the best since 1987.


Section sponsored by Manitowoc Foodservice Group

Economists Cut 2008 GDP Projection Again
Faced with the triple whammy of a tanking housing market and slower spending in both consumer and business-investment markets, economists polled monthly by Blue Chip Economic Indicators have again cut their consensus forecast for next year's growth.

The economists dropped the prediction for 2008 real growth of gross domestic product to 2.4% in the early October survey, down from 2.6% in September. The forecast for '08 has dropped half a point since July.

The GDP forecast of 2% for '07 held steady.

A key factor in the falling '08 forecast is an expected slowing of consumer spending, especially for big-ticket items. Fewer new houses mean fewer appliances and other furnishings. While the jobs numbers improved in September and were revised upward for August and July, much of the gain was in education and other government workers. Private sector hiring has continued to slow.

Disposable personal income is forecast to grow only 2.8% in real terms next year, compared with a forecast 3.4% this year. And with uncertainty in housing and the job sectors, consumers are expected to hold back spending. Personal consumption expenditures are forecast to grow only 2.3% in '08, down from 2.9% this year and the slowest growth in 17 years.

And the slowdown in consumer spending and housing means many businesses will also slow their investment in plant, equipment and software.

Still, growth is growth, and while the likelihood of a recession has been creeping up, according to Blue Chip and other surveys of economists, it's heartening to note that not a single economist on the panel is forecasting growth below 1.8%.

Section sponsored by Manitowoc Foodservice Group

Jobs Data Revised Upward, Inflation Remains Restrained But Consumer Sentiment Dips
This month's key economic data had a slightly upward cast as jobs growth improved, and inflation remained moderate. But consumer sentiment numbers fell again. This added to worries about oil prices that pushed equities markets lower through midweek last week.

Jobs data reported Oct. 5 were much better than expected. And more important, the negative number first reported for August was revised upward. The economy produced 110,000 new jobs in September according to initial estimates. The number for August was revised upwards to 89,000 from the originally reported loss of 4,000.

The Consumer Price Index, released Oct. 17, showed inflation still well in check. The index rose 0.3% in September. This follows a decline of 0.1% in August. The core CPI, which excludes food and energy prices, rose a moderate 0.2% for the fourth month in a row. Gasoline and food prices continued to rise more aggressively, at 0.4% and 0.5% respectively.

Consumer sentiment fell slightly in the midmonth reading from the University of Michigan Surveys of Consumers, reported by Reuters. The Sentiment Index fell to 82, below the median forecast of economists and down from the September final of 83.4. The Expectations Index was also lower than expected, falling to 71.6 from 74.1.

Section sponsored by Manitowoc Foodservice Group

And How About The Long Term? Economists Launch Five-Year Forecasts
Our friends at Blue Chip Economic Indicators have released the consensus forecasts for the long-range outlook for the U.S. economy. The group's October newsletter reports the economy will improve in 2009, with real growth of gross domestic product rising to 2.9%, up from the current '08 projection of 2.4%. GDP growth over the next four years, through '13, is forecast to swing back-and-forth from 2.9% to 2.8%.

The economists foresee consistent moderate growth in disposable income and personal consumption expenditures while inflation remains moderate. The forecast for the Consumer Price Index is 2.3% growth every year from '09 to '13. Finally, the economists also project a continuation of our negative trade balance with imports outpacing exports in the $475 billion to $500 billion range.

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