2006 E&S Economic Outlook

RPI Falls One Point
The National Restaurant Association’s Restaurant Performance Index fell by one point in April to 101.6.

Since an index reading of more than 100 indicates expansion, the April RPI still signals growth in the restaurant industry, however.

The RPI is comprised of two main portions: the Current Situation Index and the Expectations Index, both of which lost ground in April.

The Current Situation Index registered the steeper decline, falling by 1.3 points to 100.5 in April. The largest contributor to this fall was the same-store sales performance of reporting restaurants. According to the survey, 48 percent of operators reported higher same-store sales in April compared to the year-ago period, down from 63 percent who made the identical claim in March. Similarly, 36 percent said that their same-store sales fell in April, vs. 22 percent in March.

The Expectations Index fell by 0.7 points to 102.5 in the most recent report due to a number of factors. Thirty-seven percent of surveyed operators said they expect the overall economy to improve in the next six months, down from 43 percent in the previous survey. Meanwhile, 56 percent of operators said they expect their sales volume in six months to be higher than it was during the year-earlier period. That figure is down from 62 percent. Operators’ capital expenditure plans softened slightly, as well, with 61 percent reporting plans to spend money on equipment, expansion or remodeling in the next six months, down from 63 percent in the previous survey.

View the full April RPI report. The May report should be released here at the end of June.

Commerce Department: Foodservice Sales Increase in April
The Department of Commerce reported its advanced adjusted figures for retail and foodservice sales for April.

According to the department, retail and foodservice combined sales totaled $363.7 billion, a 0.5-percent increase, while foodservice sales grew by 0.4 percent vs. March to $35.2 billion.

Likewise, sales at food and beverage stores grew at a 0.4-percent pace, reaching $4.8 billion.

View the full report on retail and foodservice sales for April here by clicking on “Advanced Monthly Sales for Retail Trade and Food Services.” The May report can be accessed in the same manner beginning June 13.

Durable Goods Orders Fall in April
New orders for manufactured durable goods fell by 4.8 percent in April compared to May, reaching $210.2 billion. The decrease was due largely to new orders for transportation equipment, which fell by 12.7 percent to $61 billion.

New orders for fabricated metal products actually increased during the month, rising by 1.9 percent to $25.2 billion. Shipments in this category grew by 0.4 percent to $24.5 billion.

New orders for primary metals increased by 3.2 percent to $18.3 billion, while shipments grew by 0.9 percent to $17.8 billion.

“Advanced Report on Durable Goods: Manufacturers’ Shipments Orders and Inventories April 2006” can be found by visiting and clicking on the corresponding link. The May report will be available on the same site starting June 23.

Manufacturing Growth Slows in May
The Institute for Supply Management’s Monthly Purchasing Managers Index, or PMI, showed growth in the manufacturing sector slowing in May.

The PMI, based on a monthly survey of purchasing managers in various manufacturing fields, registered a level of 54.4 in May, down from 57.3 in April. A PMI above 50 percent generally indicates the manufacturing economy is expanding, while below 50 percent signals contraction.

Several of the PMI’s components also showed slowing growth in April, including the New Orders, Production, Employment, Supplier Deliveries, Backlog of Orders and Import Indices.

View the full PMI report for April here. The May report will be released on July 3 at www.ism.com. To view that report, scroll over the ISM Report on the business tab on the left side of the page, then click on Latest Manufacturing ROB.

Unemployment Claims Decline in Mid-May
The Department of Labor reported that 329,000 initial unemployment insurance claims were filed during the week that ended on May 20. That figure represents a decline of 40,000 from the previous week.

Because of previous high filing levels, the four-week moving average for claims grew by 3,250 to 333,750.

For the week that ended May 13, California, Iowa and Michigan all reported declines in filings of more than 1,000 during the week, with Iowa having the strongest week at 2,239 fewer claims.

Four states and Puerto Rico reported increases of more than 1,000 during that same week. Puerto Rico announced an increase of 26,578 due to a partial government shutdown.

Weekly unemployment claim information is released here every Thursday morning.

Consumer Confidence Declines in May
After posting a four-year high in April, The Conference Board’s Consumer Confidence Index fell to 103.2 in May from 109.8.

The Index, based on a representative sample of 5,000 U.S. households, has two portions: the Present Situation Index and the Expectations Index, both of which fell last month.

Of the two, the Present Situation Index faired better, falling by 4.7 points to 132.5. Consumers describing current business conditions as “good” fell to 28 percent from 29.7 percent in the previous survey, while those claiming business conditions are now “bad” inched up to 15.4 percent from 15.1 percent.

In comparison with these modest declines, the Expectations Index faired far worse in the latest survey, falling to 83.7 from 92.3.

Approximately 13.2 percent of the survey’s respondents said they expect current business conditions to worsen in six months, up from 9.3 percent in the previous study. Some 16.5 percent said they expect business conditions to improve, down from 17.3 percent.

The May Consumer Confidence Index can be found here. The June report will be posted at the same URL on June 27.