February 2008 Economic Outlook

By the Toby Weber, contributing editor -- Foodservice Equipment and Supplies, 2/1/2008

RPI Drops Again
The National Restaurant Association’s Restaurant Performance Index fell in December, marking its fourth consecutive decline. The RPI now stands at 98.7, 0.3 points lower than November’s reading of 99.0.

Based on a survey of domestic foodservice operators, an RPI reading of more than 100 indicates overall growth in the index’s eight key indicators, while less than 100 signals contraction. These indicators consist of two groups: the Current Situation Index and the Expectations Index.

The Current Situation Index fell by 0.6 points in December to 98.1. Same-store sales results accounted for much of this decline, with only 33 percent of operators reporting higher same-store sales compared to the year-ago period vs. 40 percent who reported higher same-store sales in November. The percentage of operators who reported lower same-store sales increased by 5 percent in December to 49 percent. Of particular interest to the E&S side of the foodservice industry, only 45 percent of operators said they invested in equipment, expansion or remodeling in the past six months, the lowest level in nearly five years.

While the Current Situation Index declined in the latest survey, the Expectations Index was unchanged. Operators’ sales-volume forecasts for six months from now remained basically flat, while their views on the overall economy worsened slightly. Approximately 51 percent of operators said they plan on investing in equipment, expansion or remodeling in the next six months.

To view the December 2007 RPI report in PDF format, go to http://www.restaurant.org/pdfs/research/index/200712.pdf. The January 2008 report will be available at the end of February. You can access it at www.resturant.org/pressroom.

Commerce Dept. Reports Higher Foodservice Sales
The U.S. Department of Commerce has released its advance figures for retail and foodservice sales for the month of December 2007. According to the DOC, adjusted retail sales totaled $382.9 billion, a decrease of 0.4 percent from the previous month.

Despite the decline, the report showed a small bump for the foodservice industry. Sales at foodservice establishments and drinking places reached approximately $38.05 billion, a 0.2-percent increase over November’s level.

Sales at food and beverage stores posted even stronger growth, increasing by 0.7 percent to $49.1 billion.

The December advanced report on retail and foodservice is available at www.census.gov/retail. The January 2008 report will be posted at the same site on Feb. 13.

Durable Goods Orders Jump
New orders for manufactured durable goods increased by 5.2 percent to $226.6 billion in December, according to an advance report from the U.S. Department of Commerce. The value of shipments of all durable goods, however, slipped by 0.1 percent to $212.6 billion.

New orders for primary metals lagged the growth registered by all durable goods, falling by 0.2 percent to approximately $20.8 billion. Shipments for primary metals increased by 0.4 percent to $20.4 billion.

Fabricated metal products registered a 2.8-percent increase in new orders in December, totaling $27.4 billion. Shipments of these products slipped by 0.2 percent to $26.1 billion.

To view the complete Advance Report on Durable Goods for December 2007, go to www.economicindicators.gov, click on the corresponding link, and then select the format in which you wish to view the report from the drop-down menus on the left side of the screen. The January 2008 report will be available March 5 at the same site.

ISM: Manufacturing Rebounded in January
The Institute for Supply Management’s Purchasing Managers Index for January 2008 showed the manufacturing sector expanding following six consecutive months of slowing growth or actual contraction.

The PMI registered a level of 50.7 in January, up from December 2007’s level of 48.4. A PMI of more than 50 indicates that the manufacturing economy is expanding, while less than 50 signals that it is shrinking.

Eight of the 10 sub-indices that comprise the PMI also improved in January, including the New Orders and Production Indices. The only two to weaken during the month were the Employment Index and the Customers’ Inventories Index.

Natural gas was one of several commodities that purchasing managers reported to have increased in price. This report listed no commodities as being in short supply.

Go to http://ism.ws/ISMReport/MfgROB.cfm to view the ISM’s complete January manufacturing report. Visit the same site on March 3 to view the February report.

Consumer Confidence Falls in January
Following a modest increase in December 2007, the Conference Board’s Consumer Confidence Index fell by 2.7 points in January to 90.6.

The Consumer Confidence Index is base on a survey of 5,000 representative U.S. households, and is comprised of two sections: the Present Situation Index and the Expectations Index.

The Expectations Index accounted for the entirety of the decline in January by dropping to 69.6 from 75.8. The percentage of survey respondents who expect business conditions to worsen over the next six months increased by 1.9 points in the latest survey to 16 percent. The percentage who expected business conditions to improve during this timeframe fell by 2.2 points to 11.6 percent of respondents. Similarly, the number of people who expect more jobs to become available during the next six months fell in the latest survey, while those who forecast fewer jobs increased.

The decline in the Expectations Index was partially offset by the Present Situation Index, which posted a 2.4-point increase to 115.3. That growth was driven by consumers’ slightly more positive outlook on the job market. The percentage of those surveyed who said jobs are “hard to get” fell by 1.6 points to 22.7 percent, while the number who said jobs are “plentiful” increased by 0.3 points to 23.6 percent.

The January Consumer Confidence press release can be found at www.conference-board.org/economics/ConsumerConfidence.cfm. The February release is set to be posted at the same web site on Feb. 26.

Unemployment Claims Rise in Late January
For the week that ended on Jan. 26, the number of initial claims for unemployment insurance increased by 69,000 compared to the prior week, totaling 375,000, according to the U.S. Department of Labor.

That figure brings the four-week moving average for initial unemployment claims to 325,750, an increase of 10,250 vs. the previous week’s moving average.

The Department of Labor also announced state-level figures for initial claims filed during the week that ended on Jan. 19. A total of 29 states reported a decline in claims of at least 1,000 compared to the previous week. With 15,401 fewer filings, North Carolina reported the steepest decline, which it attributed to fewer layoffs in the construction, trade, textile and furniture industries.

Florida was the only state to report an increase in filings of at least 1,000. The state reported 4,305 more filings than the previous week due to layoffs in the construction, trade, service and manufacturing industries.

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