Economic Outlook, April 2008

By Toby Weber, Contributing Editor -- Foodservice Equipment & Supplies, 4/1/2008

RPI Flat in February
The National Restaurant Association’s Restaurant Performance Index went unchanged in February, holding at its January level of 98.8. An RPI of more than 100 indicates expansion in the index’s eight major economic indicators, while less than 100 signals contraction.

The Current Situation Index actually increased in February, rising by 0.6 points to 98.6. This was due to an improvement in same-store sales. Approximately 44 percent of those surveyed said they experienced an increase in same-store sales in February vs. the year-ago period, up from 36 percent who reported such an increase in January. Similarly, 39 percent said their same-store sales declined, down from 49 percent in January.

Despite the increase, operators did not loosen their capital expenditure budgets during the month of February. Only 40 percent of those surveyed said they invested in equipment, expansion or remodeling in the past three months, down by 1 percent from the previous survey and a new all-time low for the RPI.

Any improvement in the Current Situation Index was offset by a 0.7-percent decline in the Expectations Index. This decline was primarily due to operators’ weakened expectations for the economy over the next six months. Only 14 percent of those surveyed said they expect business conditions to improve over that period, while 46 percent expect worsening business conditions.

To view the complete RPI report for the month of February in PDF format, go to www.restaurant.org/pdfs/research/index/200802.pdf.

DOC: Foodservice Sales Decline in February
The U.S. Department of Commerce has released its advanced figures for retail and foodservice sales for the month of February. Combined sales totaled $380.2 billion, a decline of 0.6 percent compared to January’s total.

Sales at foodservice establishments and drinking places fell also, though not as steeply. These establishments posted total sales of $38.2 billion, a 0.6-percent decline vs. January.

Food and beverage store sales fell, as well, declining by 0.2 percent to $48.9 billion compared to the prior month.

To get the full report on February’s advanced retail and foodservice sales, go to www.census.gov/retail and select your preferred file format. The March report will be posted at the same web site on April 14.

Durable Goods Orders Decline
New Orders for manufactured durable goods fell in February by 1.7 percent to $210.6 billion, according to a report from the Department of Commerce. The value of goods that were shipped in February declined, as well, moving down 2.8 percent to $210.5 billion.

New orders for fabricated metal products fell by 1.7 percent during the month to $25.6 billion, while shipments of these products declined by 1.3 percent to $25.7 billion.

For primary metals, new orders increased by 1 percent to $21.2 billion, while the shipment value of these orders increased by 0.4 percent to $20.8 billion.

Go to www.economicindicators.gov and click on the link for Advanced Report on Durable Goods to see the February report. The March Report will be available in the same way starting April 24.

PMI Shows Slowing Manufacturing Sector
The Institute for Supply Management’s Purchasing Managers’ Index, or PMI, indicated the nation’s manufacturing economy shrank in March.

The PMI recorded a level of 48.6 in March, up from February’s level of 48.3. A PMI of less than 50 indicates that the manufacturing sector is shrinking, while more than 50 signals that it is growing.

The essentially flat performance of the PMI in March reflects the mixed results in its component indices. The Employment, Supplier Deliveries, Customers’ Inventories, Prices, Backlog of Orders and Exports Indices improved during the month; the New Orders, Production, Inventories and Imports Indices declined.

Among the industries to report growth in March, according to the ISM, were the primary metals and food, beverage and tobacco products industries. The fabricated metal products industry was one of those that shrank during the month.

To learn more, go to www.ism.ws/ISMReport/MfgROB.cfm. The April report can be found at the same web address starting May 1.

Consumer Confidence Drops
The Conference Board's Consumer Confidence Index dropped sharply in March, falling by 11.9 points to 64.5.

The index is based on a survey of 5,000 representative U.S. households. It has two main components: the Present Situation Index and the Expectations Index, both of which dropped in March.

The Present Situation Index fell to 89.2 in March from February's level of 104.0. The decline reflected the significantly higher number of survey respondents who said business conditions are "bad" (25.4 percent) in March than in February (21.3 percent). Similarly, those saying business conditions are good fell to 15.4 percent from 19.1 percent.

The Expectations Index posted a steep decline in March as well, moving to 47.9 from 58.0. Respondents’ view of the economy over the next six months weakened in February, with 25.4 percent saying they expect business conditions to be worse than now, up from 21.6 percent who make the same forecast in the previous survey.

To view the press release on the March Consumer Confidence Index, go to www.conference-board.org/economics/ConsumerConfidence.cfm. The April release will be posted at the same site on April 29.