In This Section:
Macro Forecasts Slashed, October Key Indicators Plunge
Employment, Consumer Confidence Numbers Dreadful
Forecasts For Nearly All Worldwide Economies Fall
FER Forecasts For 2008 and '09 Available
This issue's Regulatory Report Sponsor: Manitowoc Foodservice
Industry ReportSponsor: Server Products
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By Robin Ashton
Macro Forecasts Slashed, October Key Indicators Plunge
Leading economists slashed their forecasts for nearly all major measures of the general economy in early November, as trends for employment, retail sales, industrial production, consumer confidence and other indicators fell precipitously in October.
The consensus of the more than 50 economic groups polled monthly by Blue Chip Economic Indicators now predicts real gross domestic product will decline for three consecutive quarters beginning with the already released -0.3% for the third quarter of 2008. The forecast calls for a significant 2.8% drop in the fourth quarter and a 1.5% decline in first-quarter '09. The group revised year-over-year GDP down to 1.4% real growth for '08 and reduced the '09 forecast by nearly a full point, to negative territory at -0.4% for '09. The '09 forecast has fallen 1.9 points in two months.
Real consumer spending has fallen off the cliff and is not expected to improve any time soon. Real personal consumption expenditures fell 3.1% in the third quarter, the worst quarterly number since 1980. The economists expect two more quarter of negative PCE: -2.6% in the fourth quarter and -0.6% in the first quarter of '09, before spending turns positive in real terms in the second quarter next year. For all of '09, the PCE forecast is -0.6%. If it holds, it will be the first annual drop in this key measure—consumer spending accounts for nearly 70% of the economy—since '80.
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Section sponsored by The NAFEM Show '09
Employment, Consumer Confidence Numbers Dreadful
The U.S. economy shed more than half a million jobs in September and October as the recession began to bite nearly every economic sector. Overall, non-farm payrolls fell by 240,000 in October. But the Department of Labor also revised upwards dramatically the numbers of lost jobs for August and September. The September total was raised to 284,000.
The unemployment rate stood at 6.5% at the end of October, up 0.4 point from September. And the current consensus forecast by the economists surveyed by Blue Chip Economic Indicators is for a peak unemployment rate of 7.8%.
While manufacturing and construction lost the most jobs, the service and retail sectors were also battered. Hospitality and leisure lost 16,000 positions.
Not surprisingly, consumers' mood is in the tank. The final reading on consumer sentiment from the Reuters/University of Michigan Surveys of Consumers showed a record drop in October of almost 13 points to 57.6. The Sentiment Index now stands 41% lower than its cyclical peak in January '07, the largest peak-to-trough drop in the index's history. The organizations's Expectations Index is 35% off its cyclical peak.
"Consumers held the least favorable assessments of their finances in more than a half century and viewed their job prospects more negatively than at any other time since the end of 1980," said Richard Curtin, director of the Surveys of Consumers.
Forecasts For Nearly All Worldwide Economies Fall
The United States is not the only economy seeing its prospects deteriorate. The Eurozone (including Germany), the United Kingdom and Japan are all forecast by the consensus at Blue Chip Economic Indicators to be entering recessions. Even some of the fast-growing economies of Asia are seeing dramatically slower growth.
The latest predictions have real gross domestic product in the Eurozone off 0.1% in '09. The German economy is forecast to contract 0.2% and the U.K. 0.8%. Real GDP growth in France is forecast flat in '09.
In Asia, the consensus real GDP forecast for China fell nearly a point to 8% for '09. The economists also revised down China's '08 to 9.5%. Forecasts for real growth in '09 have been cut to 2.8% for South Korea, 2.6% for Taiwan, 1.8% for Singapore, and 1.5% for Hong Kong. All the predictions are off one to two points from last month. Japan is forecast to be down 0.1% next year.
FER Forecasts For 2008 and '09 Available
In light of all the recent negative economic news, Foodservice Equipment Reports has revised its exclusive forecasts of the equipment and supplies market downward for this year and next.
The complete FER forecasts, featuring detailed data and analysis of general economic, operator and materials trends, data on E&S pricing trends from AutoQuotes, as well as an analysis of performance of the Top 150 E&S manufacturers, is available for $349. For information on the forecast, contact Jessica Scurlock at jscurlock@fermag.com or by calling 800/986-9616.
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www.fermag.com
