Published on Tuesday, September 18, 2012
Written by Jerry Stiegler
Foodservice-related economic indicators continue their roller coaster ride while a series of chains continue to navigate the choppy waters of today's business climate.
Advance August sales figures from the U.S. Commerce Department indicate that total retail sales rose 0.9 percent compared to July. Compared to August 2011, retail sales were up 4.7 percent. Restaurant and bar sales increased 0.5 percent last month over July. Comparing sales to August of last year, August sales increased 6.7 percent.
Please remember that these are advance numbers, subject to revision. The Census Bureau adjusts the numbers for seasonal variations like weekends and holidays but not for inflation. Unadjusted for any of these factors, the government says restaurants and bar sales are $353.4 billion, an increase of 8 percent over this time last year.
Economic News This Week
- Household income continues to fall, according to the Census Bureau. The Wall Street Journal states that the government reports indicate household annual income fell for the fourth straight year and now is down to the same income level as 1995. The WSJ article quotes a Harvard professor as saying "The economy took a huge hit and most people are still on the floor."
- Initial jobless claims for the week ending September 9 rose 15,000 to 382,000. The less volatile 4 week average of first time claims is 375,000. Some observers feel 375,000 is acceptable while others think 350,000 is a more "acceptable" number.
- Consumer confidence as measured by Reuters/University of Michigan rose to 79.2 in the preliminary September finding. The final August reading by U. of Michigan was 73.5. An eight-point rise in the future expectations section of the study was the biggest reason for the increase. The Gallup Poll's Economic Confidence Index also took a major jump. One theory is that positive feelings arising from the political conventions are driving there polls.
- The Producer Price Index rose by 1.7 percent, the largest increase since June 2009. The Bureau of Labor Statistics said the energy index rose 6.4 percent as gasoline and natural gas wholesale prices increased. The so called "core" index, i.e., without energy and food prices, was up a more modest 0.2 percent.
- The Consumer Price Index was also up in August, rising 0.6 percent overall with energy prices again getting the blame. "Core" prices were up 0.2 percent with consumer food prices also up 0.2 percent.
- Industrial Production fell 1.2 percent in August. The Federal Reserve said production lost as a result of Hurricane Isaac and the auto plant shuts contributed to the slow down. The Fed said Capacity Utilization also fell in August to 78.2 down from 79.3 in July.
- The N.Y. Federal Reserve's Empire State Manufacturing Index took a major hit in September falling to a minus 10.4 from minus 5.85 in August.
- Commodity prices continue to make news as a result of the drought. While the USDA revised the expected corn crop harvest up slightly, the department expects production to be the lowest in nine years. The USDA also revised the estimated soy bean crop down again. Worldwide wheat production is also down.
Foodservice News This Week
- The posting of calorie counts by McDonald's in all of its restaurants was treated as a major news story by the vast majority of the media. The Wall Street Journal had a very interesting quote from McDonald's CEO Jan Field, who said "It hasn't seemed to make a difference [in consumers' behavior in cities and states that already required calorie counts be posted have not seemed to change]". The late Jane Wallace, long-time editor of Restaurants & Institutions Magazine observed years ago that people who are truly interested in healthy eating probably aren't going to McDonald's.
- Chinese restaurant chains looking to expand should use McDonald's as a model for quality standardization, according to an article in the Chinese Daily.
- McDonald's cult favorite McRib is usually offered in late October thru early November but Ad Age reports that the McRib promotion will be moved to December this year to help promote traditionally slow winter sales.
- San Diego has new restaurants popping up all over, according to the San Diego Union Times. One theory is that the 3 percent growth in independent restaurants is just a return to normal after the failure of many restaurants during the recession. A second theory is that restaurant operators are taking advantage of favorable rents but one established multi-restaurant owner admits the number of new operations leaves him "baffled."
- Piccadilly Restaurants has filed for bankruptcy. The Baton Rouge based firm has approximately 80 restaurants and runs 70 contract operations, according to Reuters.
- Customers' beverages only ordering occasions are increasing, according to The NPD Group. The research firm says the number of occasions where both food and beverages were ordered declined by 2 percent while overall the number of occasions stayed flat.
- Popeye's Louisiana Kitchen Restaurants issued a press release stating that Hurricane Isaac caused 104 of their units to close for 1 to 5 days. Company-owned restaurants had damage costs of less than $200,000. The company also said they experienced strong sales both before and after the storm. The chain projects the storm will reduce net income by less than $60,000.
- Growth Chains: Blaze Fast Fired Pizza opened a restaurant in California with a second and third unit set to follow. The chain is offering franchises in 32 states. Papa Murphy's has signed a master franchise agreement that will bring 100 stores to the Persian Gulf region. The Corner Bakery Café has a franchise agreement to open 18 restaurants in the Pacific Northwest in the next 7 years.