We’re Sticking With FER’s E&S Forecasts

This is normally the time of year that our forecasting partner John Muldowney, principal at Clarity Marketing, and I look at our current equipment and supplies market forecasts. We talked last week and see no reason to revise either our 2015 estimate or our 2016 forecast. In fact the third quarter numbers from MAFSI and the E&S public companies (see articles this issue and last issue), as well as continuing favorable macroeconomic trends and strength in operator capital spending indicators, have convinced us our current “informed guesses” are pretty much right on.

Those forecasts, just to remind you, are for 4.8% current dollar growth in 2015, with real growth pegged at 2.5%, and 4.6% nominal growth next year and another year of 2.5% real growth.

The jobs numbers continue to be strong, gasoline prices continue to fall, and consumer confidence is up. Operators weathered a slight slowdown in the rate of sales and traffic growth late summer and early fall, but early indications are they have recovered. The capital spending indicator tracking buying during the past three months hit its fourth record high in the October NRA survey. And the forward-looking Restaurant Performance cap-ex indicator remains very positive.

On the economic number side, the MAFSI Barometer has had an unprecedented three-quarter run so far in 2015. Since its launch in the second quarter 2002, it had never exceeded 5% growth in two consecutive quarters. It did so in the second and third quarters. The public equipment companies have been posting somewhat more moderate growth, but when one pulls out Manitowoc Foodservice, dealing with structural issues as it prepares to be spun out, and big cut backs at McDonald’s and Yum!, the other five equipment-oriented companies are up 8.3% during the first nine months. Even with Manitowoc, the six have seen 4.2% combined increases. These are all very good numbers seven years into the E&S market’s recovery from the Great Recession.

We’ve been saying that 2015 is the peak of the current cycle for nearly a year now. We’re not so sure any more. We think 2016 will see real growth just as strong or maybe a tad stronger than 2015. At worst, it will be only slightly slower.