Foodservice Equipment Reports

Be Careful Out There; Top Dealer Survey Coming Soon

We’re out in California this week for our annual utilities forecast tour. Along with Richard Young, director of education for Food Service Technology Center, we make forecast presentations for Pacific Gas & Electric Tuesday at the FSTC in San Ramon; in San Diego on Wednesday at San Diego Gas & Electric; and on Thursday at Southern California Edison in Irwindale.

The big topic of conversation will undoubtedly be the state of the market and the possible effects of the  big declines in the equities markets (it was another ugly day on Wall Street yesterday) and other signs that the economy in the U.S. may be at an inflection point. Because it’s not just the markets and the continuing plunge of oil prices that are making people nervous.

I just received yesterday the latest issue of Blue Chip Economic Indicators and the 50 or so economic forecasting groups polled monthly are suddenly pretty glum. As Randy Moore, executive editor at Blue Chip put it: “Contributing to increased pessimism about economic growth this year are the weakness of economic growth in the final quarter of last year; early signs that the softness persisted as the new year began, especially in the all-important services sector; recent sharp losses in the equity markets; stress in the high-yield debt market; the strength of the U.S. dollar; continued excesses in private inventory levels; a further plunge in oil prices; and the persistence of soft economic growth abroad.”

Whew, that’s quite a list! Bummer! Time to hunker down?

Well, you know I always advise keeping one’s eyes open to what’s going on in the economy and E&S market generally, but also in your particular market. It’s why I play this forecasting game for you and why it’s part of your job description to be as close to your customers as you possibly can be.

But I just keep looking at the fundamentals for foodservice and the E&S market and what’s going on in the general economy doesn’t seem to undermining those fundamentals. Disposable personal income and consumer spending are still forecast to grow at nearly 3% real this year (The Blue Chip folks changed the DPI forecast only a tiny whit in the latest forecasts.).

Employment trends remain strong. While January’s job growth was down a bit, wages rose 0.5% for the second consecutive month, cheering up a lot of people. The plunge in oil and gasoline prices continues to put more money in consumers’ pockets. Here in California, which has benefited least from the drop in gas prices because of supply problems caused by a big refinery fire last year, prices have dropped 35 cents in the last month alone. That is going to help foodservice sales in the single largest foodservice market in the country this year. Consumer confidence wasn’t affected by the stock market declines at all. The Conference Board’s Consumer Confidence Index rose in January.

So don’t go looking for a cliff just yet. Please. But to be fair and balanced, the NRA’s Restaurant Performance Index plunged in the December reading. The survey was conducted in January and the market declines and weak December sales and traffic appear to have spooked the restaurateurs. The index fell below 100, the tipping point between expansion  and contraction for the first time in 34 months. Still, the two capital spending indicators remained in expansion territory.

So as the sergeant on Hill Street Blues always said, “Be careful out there.” I have a bet with Joe Pawlak at Technomic Inc. that the RPI will be back above 100 by March. We’ll see.

By the way, keep an eye on your inbox for our annual Top Dealer survey. Chris Palmer should have the survey form up on the website in the next week or so. And we’ll send it out to as many of you as we can. Multiple times.


Robin Ashton


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