Are We Going to Party on in 2017?

It’s the middle of July as I write this and that means I’m neck deep in preparing our annual foodservice equipment and supplies market forecast. We present the forecast Aug. 9 at our annual President’s Preview E&S Market Forecast meeting in Rosemont, Ill.

We’re living in interesting times. On the one hand, the foodservice and E&S markets are doing quite well in the U.S., thank you, not that both markets don’t have their challenges. On the other hand, there is a world of uncertainty out there. We have the stunner of the British referendum to leave the European Union, the circus of the political arena and presidential election and, not least, a spate of terrorist incidents and police shootings. Nearly everyone seems tense and is questioning just what in the world is going on. This environment makes forecasting even more difficult than usual.

What I’ve learned over the decades I’ve been doing this is to focus on the fundamentals. A lot, though not all, of the events that drive our moods day-to-day in the end don’t affect our industry that much. People have to eat, and, thank goodness, in the U.S. that means eating away from home all the time.

So I’ll just state it clearly: The economic fundamentals that drive the foodservice and the E&S markets remain very good. And I can see nothing on the immediate horizon that indicates we’re about to see a dramatic change in direction for either market.

The five key macroeconomic indicators that drive foodservice sales on the commercial side continue to be positive: jobs and average wage growth, disposable income and consumer spending growth, consumer confidence and continuing low gasoline prices. This has led our friends at Technomic Inc. to forecast 5% growth of current dollar sales for the total foodservice industry this year and 4.9% growth next year. Real growth, factoring out menu-price and food-cost increases, is predicted to be 2.4% this year and 2.3% in 2017.

Operators face some challenges, as they always do. Labor costs are rising, and after falling for almost two years, it seems food prices at the wholesale level are beginning to rise moderately. Traffic continues to be stubbornly flat for many restaurant operators. But in spite of the cost and traffic issues, operators surveyed for the NRA’s Restaurant Performance Index continue to report near-record levels of capital spending.

From my forecasting perspective, the real issue for the foodservice and the E&S markets is just how long the expansion of both markets has gone on. Yes, both markets had three or four years of very moderate growth coming out of the Great Recession. But if Technomic’s and our own forecasts hold for ’16 and ’17, both markets will have experienced the best three years, ’15 to ’17, since ’05 to ’07. One just tries to anticipate when the needle begins to point down.

On the E&S side, our current forecast—not the new one—already builds a bit of slowing into both ’16 and ’17, but not much. After the next couple weeks, I’ll be able to tell you if I’ve changed my mind. I doubt I will.