January 2008 E&S Economic Outlook

By Toby Weber. Contributing Editor -- Foodservice Equipment and Supplies, 1/1/2008

RPI Drops in November
The National Restaurant Association’s Restaurant Performance Index fell by one point to 99.0 for the month of November 2007.

The RPI is based on a survey of domestic foodservice operators. A reading of more than 100 indicates overall expansion in the index’s eight industry indicators, which consists of two sections: the Current Situation Index and the Expectations Index, both of which declined in November.

The Current Situation Index fell by 1.2 points to 98.7 in the latest survey. The fall was due largely to weaker same-store sales results vs. the same period a year ago. Approximately 40 percent of those surveyed reported stronger same-store sales, while 44 percent said their same-store sales declined. In the previous month, those figures stood at 44 percent and 36 percent, respectively.

Operators’ capital expenditures fell in the November report, as well. Some 49 percent of surveyed operators said they invested in equipment, expansion or remodeling in the past three months, down from 54 percent in October.

The Expectations Index fell by 0.8 percent in the latest RPI report, a decline that occurred largely because of operators’ weakened sales outlooks. Twenty-nine percent of those surveyed said they expect to record higher sales in six months vs. the year-ago period, while 28 percent expect lower same-store sales. Those numbers stood at 39 percent and 25 percent, respectively, in the previous survey.

The complete report is available in a PDF format at the following web site: www.restaurant.org/pdfs/research/index/200711.pdf.

Report: Retail, Foodservice Sales Rise in November
The Department of Commerce has released its advanced figures for retail and foodservice sales for the month of November 2007.

Combined seasonally adjusted sales for both categories reached $385.8 billion, an increase of 1.2 percent vs. the previous month.

Sales at foodservice establishments and drinking places grew at a slower pace, 0.3 percent, and reached $38.2 billion. Sales at food and beverage stores increased by a full 1 percent to $48.8 billion.

Visit www.census.gov/retail to find the November advanced report on retail and foodservice sales. The December report will be available on Jan. 13.

ISM Reports Shrinking Manufacturing Sector
The Institute for Supply Management’s Purchasing Managers Index recorded a level of 47.7 in December, signaling that the manufacturing sector contracted over the course of the month.

A PMI reading of more than 50 indicates the sector is in an expansion phase, while less than 50 signals that it is shrinking.

Two of the PMI’s sub-indexes, the New Orders and Production Indexes, also moved from growth to contraction in December. The Exports Index showed slowing growth in that arena.

Meanwhile, the Employment, Supplier Deliveries, Customers Inventories, Prices, Backlog of Orders and Imports Indexes all showed modest improvement in December.

The report also showed that the cost of natural gas and stainless steel increased during the month.

The ISM’s full December report is available at www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942. The January report will be available Feb. 1.

Durable Goods Orders Inch Up
The Department of Commerce announced that new orders for manufactured durable goods posted a slight increase in November, rising by 0.1 percent to $214.7 billion. Shipments of all durable goods were essentially flat during the month at approximately $213.3 billion.

Despite the overall increase in durable goods orders, new orders for fabricated metal products fell by 0.6 percent in November to $26.5 billion. The values of fabricated metal products that were shipped during the month increased by 0.1 percent to $26.1 billion.

Primary metal products posted a 0.6-percent increase in new orders to $20.8 billion, while the shipments of these products declined by 0.4 percent to $20.4 billion.

To see the November advanced report on manufactured durable goods, go to www.economicindicators.gov.

Consumer Confidence Rises in December.
Following four consecutive months of decline, the Conference Board’s Consumer Confidence Index increased by 0.8 points in December. The index now stands at 87.8.

Based on a representative survey of U.S. households, the index has two main sections: the Present Situation Index and the Expectations Index.

Despite the overall increase, the Present Situation Index actually declined in December, moving to 108.3 from 115.7 in November. The percentage of those surveyed who said business conditions are “good” decreased by 2.5 points to 20.3 percent, while those who said current business conditions are bad increased 1.1 points to 20.0 percent. Consumers’ evaluation of the labor market also showed fewer optimistic views and more pessimistic ones.

The Expectations Index grew to 75.5 in December from November’s level of 69.1 — an increase that more than offset the decline in the Present Situation Index. Those expecting business conditions to improve over the next six months increased by 1.4 points to 13.8 percent, while those expecting business conditions to worsen fell by 1.5 points to 14.1 percent.

The December report is available at www.conference-board.org/economics/ConsumerConfidence.cfm. The January report will be posted at the same site on Jan. 26.

Unemployment Claims Rise Slightly in Mid-December
The Department of Labor released its weekly unemployment claim information for the week that ended on Dec. 22. The DOL received a total of 349,000 initial claims for unemployment insurance during the week, an increase of 1,000 from the previous period.

Despite the increase, this new data lowers the four-week moving average for initial filings by 1,000 to 324,500.

The DOL also released state-by-state claim information for the week that ended on Dec. 15. Sixteen states reported declines in claims of at least 1,000 compared to the prior week. California reported the steepest decline, reporting 5,354 fewer claims, which it attributed to fewer layoffs in the agricultural, forestry and fishing industries.

Five states reported increases of at least 1,000 in the number of claim filings. Missouri reported the largest increase, of 3,920 more claims, which it blamed on layoffs in the construction, service and manufacturing industries.

Weekly unemployment claim information is posted every Thursday morning at http://www.dol.gov/opa/media/press/eta/ui/current.htm