Rethinking The Forecast

Maybe I was wrong. A few weeks ago, in the middle of the government shutdown and debt-ceiling fight, I wrote that I thought the confrontation might cost the E&S market half a point of growth this year and as much as a point next year. But now, a few weeks past the crisis, I’m feeling better about things.

A friend from a big E&S conglomerate emailed me yesterday asking for my thoughts. I told him the few bits of industry data we’ve seen since the shutdown (which has delayed the release of common government economic data) have been surprisingly positive. The National Restaurant Association’s Restaurant Performance Index was down in September, but remained above the 100 level that separates expansion from contraction (it was 100.2). And the capital spending numbers, including operators that made a purchase and those planning to do so, rose strongly. Now that was based on the September survey and we’ll have to see what happened in October in the middle of the federal government mess, but it was still a pleasant surprise.

The early general numbers we’ve seen on operator trends in October were also lower, but not dramatically so. And a number of chains are reporting surprisingly strong third quarter same-store sales results.

Not least, manufacturers and dealers I’ve spoken with over the past couple months continue to say sales remain decent. The chains keep buying, street business isn’t bad, and the spec markets do indeed seem to be recovering.

So before John Muldowney and I revise the current forecasts for 2013 and 2014, we’ll wait until we see the third-quarter numbers from the MAFSI Barometer and the E&S conglomerates. We’re sticking with 3.3% current dollar growth this year and 4.1% next for now.

Cheers,

Robin Ashton

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