2014 E&S Forecast? Better. It’s The Long-Term That’s Worrying

We released our forecasts for growth of the foodservice equipment and supplies market last week during FER’s annual President’s Preview E&S Market Forecast meeting, held at the Westin O’Hare in Rosemont, Ill. As we wrote a couple weeks ago (see story here), the rest of this year looks stronger than the very weak E&S market growth of the first half.

All the fundamentals point to an even stronger market next year. We forecast current dollar growth of only 3.3% in 2013 with real growth of 1.5% this year. Our forecast for ’14 is 4.1% nominal and 2.1% real. And we also forecast moderate continuing market growth for the three years out past 2014. It looks like 2015 may be the peak of the current cycle.

(Now that the meeting is over, you can buy the complete FER E&S Market Forecast for $1,295. It includes eight PowerPoint decks covering everything from the general economy, operator trends, materials and E&S pricing outlooks, listings of top E&S manufacturers and dealers and our forecasts out through 2017. Just email me at rashton@fermag.com if you are interested.)

We always like to discuss at President’s Preview what’s happening not just in foodservice and the foodservice equipment and supplies markets, but what the trends are in the wider world that impact our lives, our businesses and our society. We had plenty of that at this meeting—a couple of attendees told us we depressed them—because the structural challenges of employment, demographics and the like facing the developed economies have become important factors in our longer-term planning for growth. And as we always try to make clear, growth is not just good, in some ways it is essential. No growth, no bigger pie, no rising boats and a decline into a world in which everyone starts fighting for share.

It comes down to two problems. One involves employment, or rather employability. Our machines are making us so productive, the need for labor inputs—particularly labor inputs from moderately or poorly educated folks—is diminishing. Most of us are aware of the loss of jobs in manufacturing over the past 30 years and in construction since the housing and retail bubbles burst, initiating the Great Recession. But we heard a report last week. based on a study by the Bureau of Labor Statistics, that’s equally scary. Since the beginning of the recession and accelerating after the recession was technically over, some 2,000,000 office and clerical workers have lost their jobs. We have now learned to get by without assistants, secretarial help, and a whole range of so-called white collar functions. When politicians and economists talk about the “hollowing out” of the middle class, these are the kind of trends they mean. Just what are all these people going to do for a living? If they can’t make one, they can’t afford foodservice.

The other problem is and has been demographics. We’re back to the ever-constant issue of the Baby Boom population bubble and its impact on social welfare support costs. What’s tough here is the political difficulty in nearly every developed economy in the world to take away things that have been promised from a very big group of people who vote. Anyone paying attention knows that we’ve known about this problem for three decades and still mostly haven’t done anything about it.

We certainly have no suggestions for how we address these challenges, other than to say what one gets, one ultimately has to pay for and that in the end, we’re all responsible for understanding the issues and working to fix them. I’m still an optimist. Human beings are pretty resourceful, but sometimes they need to be pushed against a wall before they act.

Cheers,

Robin Ashton

Publisher

rashton@fermag.com