Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
December 7, 2004

Industry Report:
Sponsored by: Atlas Metal Industries Inc.

Speed-Oven Rollout Makes Subway Hot To Trot
NSF Wants YOU To Nominate Food Safety Leaders
In Ontario, ‘A’ Stands For Accessibility
Skinner Steps Up As McCEO at McDonald's
L&L Hawaiian Barbecue To Spread Aloha Taste
Frima Takes Top APRIA Award

Regulatory Report:
Sponsored by: Hatco Corp.

SoCal Charbroilers Off Hook For Now
Chicago Ventilation Codes Go ‘Back To the Future’
Smoking Bans? Butt Wait, This Time It’s The U.K.
IMC ’06 To Reflect ASHRAE 154
Indiana, Wisconsin Adopt New Food Codes

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In This Section:

November Jobs Growth Weaker Than Expected
NRA’s Performance Index Rises; E&S Indicators Agree
Blue Chip Economists Stand With Forecasts, Predict Rising Interest Rates
Consumer Confidence Measures Mixed, 3Q GDP Estimate Boosted

This issue's Industry Report
Sponsor: Atlas Metal Industries Inc. |  Regulatory ReportSponsor: Hatco Corp.

Economic ReportSponsored by ES3

November Jobs Growth Weaker Than Expected
The November monthly employment report from the federal government’s Bureau of Labor Statistics caught nearly everyone by surprise with weaker than expected tallies. The shock seemed particularly severe because the October reading had been so strong—but the extra surprise was that September and October numbers also were revised downward.

The BLS said only 112,000 jobs were created in November, well under the 125,000 to 150,000 most economists say are necessary just to absorb labor force increases. Many observers were expecting increases of at least 200,000, especially because November usually sees a ramp-up of temporary retail employment. The unemployment rate did fall 0.1 point to 5.4%.

The BLS revisions of October and September jobs growth took totals down by 34,000 and 20,000 respectively.

Now economists are talking again of a slowdown in general economic growth because of the lower job creation, slower consumer spending growth and rising interest rates. Slow job growth tends to impede growth in foodservice sales.

Section sponsored by ES3

NRA’s Performance Index Rises; E&S Indicators Agree
If two months a trend makes, the restaurant industry as tracked by the National Restaurant Association’s monthly Restaurant Performance Index is back to a positive trend. The organization’s full index rose for the second consecutive month in October, rising 0.9 point to 103.8. The index had fallen gradually for six months after peaking in February. The index rose the minimum 0.1 point in September. All eight components of the index, including previous and expected capital expenditures, rose in the October survey, released Nov. 30.

The Current Situation Index rose 1.0 point, driven by a strong rise in the Customer Traffic and Labor components. The component tracking capital expenditures during the previous three months rose 0.4 point. This index has waffled back and forth the past five months.

The Expectations Index was up 0.9 point following a decline of 0.5 point in the September Survey. Anticipated capital expenditures the next six months showed a strong 1.7 point gain in October. This capital expenditures index has also been waffling.

Improving consumer confidence (see related story), a stronger jobs market and moderating gasoline prices are helping foodservice customer counts in general rebound.

Section sponsored by ES3

Blue Chip Economists Stand With Growth Forecasts, Predict Rising Interest Rates
Leading economists surveyed by Blue Chip Economic Indicators have stuck with their pre-election forecasts for 2004 and ’05 real GDP growth. And while they see the rate of overall growth slowing slightly and believe inflation at the consumer level will remain moderate, they do expect the Federal Reserve Bank to continue raising interest rates throughout the coming year.

In the newsletter released Nov. 10, the Blue Chip consensus for real GDP growth in ’04 remained at 4.4%, unchanged from the October survey. The ’05 consensus forecast of 3.5% real growth was also unchanged. The forecasts were made before the federal government revised its estimate of third-quarter ’04 GDP growth to 3.9%, up from the preliminary estimate of 3.7%.

In the separate Blue Chip Financial Forecasts newletter, released Nov. 1, the economists predict that the Federal Reserve Board will continue to boost the Federal Funds Rate throughout next year, with the rate increasing from the current (as of the Nov. 10 Open Market Committee meeting) 2.0% rate to 3.5% by the end of 2005. The thinking is the Federal Reserve will continue to return interest rates to more "normal" levels, particularly if inflation shows any signs of ramping up.

Section sponsored by ES3

Consumer Confidence Measures Mixed, 3Q GDP Estimate Boosted
Consumers remain realistic, or perhaps flexible, about their economic expectations, judging by separate confidence and expectations measures that reported mixed results in late November. Consumer sentiment and expectations indices fielded by the University of Michigan in November rose moderately. But The Conference Board’s Consumer Confidence Index, reported a week after the Michigan measures, recorded a decline that surprised investors, leading to a one day sell-off on Wall Street.

Richard Curtin, director of University of Michigan Surveys of Consumers characterized consumers as "both confident enough to spend more as well as cautious enough to save more in 2005," in the release accompanying the November surveys. The re-election of President Bush appeared to have little or no effect on consumers’ outlook on economic prospects.

The Index of Consumer Sentiment rose to 92.8 in November, up from 91.7 in October. The Index stood at 93.7 in October 2003. The widely followed Expectations Index, a component of the government’s "Leading Economic Indicators," stood at 85.2 in November, up from 83.8 in October. Again the Expectations Index was slightly higher at this time last year.

Consumers remain unsure of job prospects, despite the report of strong jobs growth in October, and say that high gasoline prices have had a negative impact on their budgets, particularly among lower-income households. They also expect mortgage interest rates to rise. For this reason, Curtin sees the same slowing of overall growth forecast by the Blue Chip economists for next year (see related story.)

These same issues were at work in The Conference Board’s confidence survey as its index fell slightly.

On the good news front, the Commerce Department raised its estimate of real GDP growth in the third quarter ended September ’04 to 3.9%. The initial estimate was 3.7%, a figure that negatively surprised many investors, but not the Blue Chip group. Its consensus for the third quarter had been 3.8%. They look right on now.

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