Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
December 16, 2008

Regulatory Report:
Sponsored by:
Manitowoc Foodservice
EECC '30% Solution' Falls Short, But Efficiency Codes Tighten
Court Ruling Could Mean Higher Energy Prices
Westchester Weighs In On Calorie Counts—It's A Yes
Rome, Ga., Hikes Water, Sewer, Landfill Fees

Industry Report:
Sponsored by:
Server Products
Manitowoc Names Leadership Team
Manitowoc, Foster, Pi Honored By FCSI
ServSafe Fifth Edition Hits The Web
Yum! Targets 1,175 Overseas Openings

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In This Section:
NRA Index Inches Up In October
Commercial Foodservice As Leading Or Current Indicator?
NRA To Release 2009 Forecast Friday
U.S., Worldwide Macro Forecasts Deteriorate Further
A Couple Months Old, But Still Great Stuff: FER's Forecasts For 2008, '09

This issue's Regulatory ReportSponsor: Manitowoc Foodservice
Industry ReportSponsor: Server Products
Economic Report The NAFEM Show '09

By Robin Ashton

NRA Index Inches Up In October

Gosh, it's fun to write a headline that's even a little bit positive on the economic and foodservice front, even if it's about October. The National Restaurant Association's Restaurant Performance Index inched upward to 97.1 in October. It was a 0.4-point rise over September's record low. The gain was surprising given the performance of the rest of the economy that month. Five of the Index's eight components improved. The two capital-expenditure components were lower.

Still, the Index remained below the 100-point level that is the dividing line between contraction and expansion. October was the 12th consecutive month the Index remained below 100.

Another brighter note may be that the Expectations Index, four components that indicate restaurant operators' view of the near-term future, rose 0.6 point, to 97.6. The Expectations Index also was at a record low in September and has been below the 100 tipping point for 12 consecutive months. Operators' outlook for same-store sales and business conditions six months from now registered surprisingly strong 1.3- and 1.6-point gains respectively. It may be that operators think things are bottoming out finally, but one month does not a trend make.

The Current Situation Index rose 0.2 point on gains in the same-store sales and traffic components. It has been in negative territory for 14 consecutive months.

The marker tracking operators planning a capital expenditure during the next six months fell 0.8 point, and the measurement of operators who made an expenditure during the preceding three months was down 0.3 point.


Section sponsored by The NAFEM Show '09

Commercial Foodservice As Leading Or Current Indicator?
On the same day the National Restaurant Association released its October Performance Index, we learned the Business Cycle Dating Committee of the National Bureau of Economic Research, a board of academic economists, determined the U.S. economy reached its peak in December 2007. Which means since then, the U.S. economy has been in recession.

There's a lot behind the Committee's complex calculations that we needn't detail here, but we were struck by how the NRA's Restaurant Performance Index anticipated the broader downturn by one to three months, depending on what part of the RPI is analyzed.

As we mentioned in the story above, The Current Situation Index had been below that 100 tipping point between contraction and expansion for 12 months as of October—possibly 14 months by the time you read this. It went into negative territory in September '07. The overall Index and the forward looking Expectations Index as of October have been below 100 for 12 months, or beginning November '07. Overall real gross domestic product did decline 0.2% in fourth-quarter '07, but then went positive for the first two quarters of '08. The NRA's RPI has remained in contraction territory consistently.

Back in the go-go days of restaurant-industry growth in the '80s and mid- to late '90s, it was conventional wisdom that restaurant industry sales, particularly those of the larger chains, were a leading indicator by three to six months. It looks as though they still might be, despite the ongoing maturation of the foodservice market.

We'll keep an eye on the RPI and other market indicators to see whether they show consistent signs of an upturn—which we can hope will anticipate improvement in the general economy.

 Section sponsored by
The NAFEM Show '09

NRA To Release 2009 Forecast Friday
The National Restaurant Association will release its annual restaurant-industry forecast at a press conference scheduled for 11 a.m. EST, Friday, Dec. 19, at the association's headquarters in Washington, D.C. As usual, the forecast provides detailed 2009 segment-by-segment sales-growth forecasts for the entire foodservice industry as well as an overview of economic issues, menu trends, workforce growth and issues and legislative initiatives NRA plans to pursue during the coming year. In addition, the forecast traditionally includes state-by-state and regional forecasts

The press conference will feature Dawn Sweeney, NRA president and CEO; Hudson Riehle, senior v.p. of research and information services; and John Gay, senior v.p. of government affairs and public policy. For those interested, the press conference will be broadcast live online through

Riehle told our print sister publication Foodservice Equipment Reports several weeks ago that the association will forecast a real decline in industry sales in '09, the first such decline forecast by NRA since 1991.

The forecast will be available for purchase shortly after the conference. NRA typically charges a modest fee for the presentation in .pdf form. Information on purchasing the forecast will be available through the Web site above.

 Section sponsored by
The NAFEM Show '09

U.S., Worldwide Macro Forecasts Deteriorate Further
Leading economists, as represented by the 48 economic forecasting groups polled in early December for Blue Chip Economic Indicators newsletter, continue to cut their forecasts for the U.S. economy and nearly every leading major economy worldwide.

In particular, the economists significantly cut their forecasts of U.S. real gross domestic product for the coming year. The consensus for 2009 real year-to-year GDP growth fell to negative territory, -1.1%, as the group now believes GDP will fall for four consecutive quarters beginning with third- quarter '08 and ending with a 0.4% real contraction in the second quarter of '09. (Current-quarter '08 GDP is expected to decline a whopping 4.1%.)

Of those surveyed 46 of 48 economists cut their '09 U.S. GDP forecasts.

U.S. personal consumption expenditures, essentially consumer spending, is expected to contract 1% in real terms in'09, down 0.4 point from the November consensus forecast. If the forecast holds, it will be the worst year for real U.S. PCE since 1942 (That's not a typo: '42).

The economists dramatically cut their forecasts for all 16 major economies they typically track; seven are now forecast to have negative real GDP next year. Even the forecast for China fell to to 7.6% growth for '09, off nearly two points from the forecast of 9.5% in '08 and way off '07's 11.9% GDP growth.

 Section sponsored by
The NAFEM Show '09

A Couple Months Old, But Still Great Stuff: FER's Forecasts For 2008, '09
The complete Foodservice Equipment Reports forecasts, revised in mid-October, feature 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 from John Muldowney of Clarity Marketing, Tipp City, Ohio. It's available for $349. For information on the forecast, contact Jessica Scurlock at or by calling 800/986-9616.

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