Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
November 6, 2007

Regulatory Report:
Sponsored by:
'Terminator' Terminates Menu Labeling Bill
NYC Revamps Menu Labeling Proposal
California Flushes Old Toilet Standards

Industry Report:
Sponsored by:
Aga Sells Commercial Division To Ali
Minneapolis Restaurant Aims To LEED First
Malody, Ward Honored By FCSI
U.K. Buildings To Run On "McFuel"

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In This Section:
FER Trims 2008 E&S Market Forecast
NRA's Performance Index Dips In September But Expectations Up
Fed Cuts Interest Rates, GDP Grows In 3Q, Consumer Confidence Sags

This issue's Regulatory ReportSponsor: Enodis
Industry ReportSponsor: FHA2008
Economic Report Manitowoc Foodservice Group

FER Trims 2008 E&S Market Forecast
The outlook for the foodservice equipment and supplies market remains positive for 2008, despite general economic growth that is forecast to slow and other factors roiling the current U.S. expansion, according to FER Fortnightly sister publication Foodservice Equipment Reports.

While some economic factors pose downside risk for the E&S market next year, FER Publisher Robin Ashton said, most of the fundamentals that drive the market signal another year of positive real growth.

Ashton and John Muldowney, principal at Clarity Marketing, have revised their forecast of the growth of manufacturers' sales downward only slightly from their preliminary '08 forecast released Aug. 1 at the magazine's President's Preview forecast seminar. The new forecast is for current dollar growth of 5.9% and real growth, factoring out estimated price increases, of 1.5%. The preliminary forecast predicted real market growth a third of a point higher.

"A lot has happened since we did the original forecast in mid-July," Ashton said, "including the collapse of the sub-prime mortgage market and the resulting credit squeeze. But the reality is these very real problems for the general economy don't affect the E&S market very much.

"The most significant concern is that consumer spending is forecast to slow next year," Ashton added. "This could slow spending for foodservice—Technomic forecasts slightly slower positive growth for operator sales next year—and with a bit of lag, begin to slow operators' purchases of E&S. Our revised forecast reflects this."

The complete revised 2008 Equipment & Supplies Market Forecast is available from FER for $249. The forecast includes detailed current data and analysis of the general economy, the operator market, material pricing, historical E&S price data from AutoQuotes, plus detailed forecasts of growth and price changes for nine categories of equipment and supplies. To order the forecast or for more information, contact Jessica Scurlock at or call 800/986-9616.


Section sponsored by Manitowoc Foodservice Group

NRA's Performance Index Dips In September But Expectations Up
A bit of schizophrenia entered the data from the National Restaurant Association's Restaurant Performance Index in September. All the components in the Current Situation Index were down sharply. But all the components of the Expectations Index were positive.

Same-store sales and traffic were down 1.8 and 1.9 points respectively in the September reading, while capital expenditures during the past three months were off 0.9 point. With a negative labor trend as well, the Current Situation Index fell 1.3 point and sank to 99.9, by the slimmest margin below the 100 tipping point that separates expansion from contraction. Two of the components, traffic and labor, were also below 100.

But the same operators responding to the survey said the outlook for same-store sales during the next six months is better. They pushed the same-store sales component of the Expectations Index up 0.6 point. The outlook for business conditions was also up 0.8 point and moved back above 100. And most important to E&S suppliers, the component tracking operators' intention to make a capital expenditure during the next six months rose 0.1 point to 101.4.

Section sponsored by Manitowoc Foodservice Group

Fed Cuts Interest Rates, GDP Grows In 3Q, Consumer Confidence Sags
Last week was a busy and interesting one for economic data. As expected the Federal Reserve gave Wall Streeters and Main Streeters a quarter-point cut in its key discount rate, to 4.25%. Meanwhile, the growth of real gross domestic product in the third quarter, as charted by the first "advance" estimate, outpaced nearly everyone's expectations, surging to 3.9%. You'd think Wall Street would be happy, right? Nah!

Oh, they gave the stock indexes a bit of a nudge at first on Wednesday last week, then went right back to worrying about the housing problems, the credit crunch affect on big financial firms (now the culprit is Citibank), and a drop in consumer confidence as measured by both the Conference Board and the University of Michigan survey released by Reuters. The Dow Jones dropped like a stone Thursday.

Here's what matters to foodservice and the equipment and supplies market: The big jump in the GDP number was in part a result of stronger-than-expected consumer spending. As we've said all along, the sub-prime mortgage debacle just does not seem to have much effect on most people. Second, the rate cut can't hurt. It will help both consumers whose credit card rates are tied to the prime rate and anyone, including foodservice operators, who need or want to borrow money.

The declines in the consumer sentiment/confidence measures are a tad more worrisome—the Conference Board measure fell to a two-year low—but the drops are tied to consumers' perception of declining housing values. That's a real worry for many consumers and makes them a bit less certain about their future wealth. But it probably doesn't affect their day-to-day need to eat. And as the release from the University of Michigan stated, "The overall level of confidence is still well above the point that signals an impending recession."

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