US - Is meat and poultry demand softening after a strong two year run? That is a very important question being posed by analysts as they try to look at these markets going forward. As DLR readers know, virtually every metric points to the strength of demand over the past two years but what is it doing now? write Steve Meyer and Len Steiner.
We can’t say for sure since complete data is always lagged but we get some ideas from surveys of various industry segments and, of course, consumers themselves.
The three publicly available indexes for these conditions that we monitor all took small steps downward in their most recent respective months but the declines were not large and some key components were quite positive.
All narratives mentioned the negative impact of harsh winter conditions. Sounds like a repeat of last year when a very cold January left our demand measures lower, year-on-year, for the only month of 2014.
The National Restaurant Association’s Restaurant Performance Index (RPI) declined 0.2 points to 102.7 in January. That figure is still well above the 100 level that demarks contraction from expansion so the sector still appears to be quite healthy.
January was the 23rd consecutive month with RPI over 100. As has been the case for much of the last year (and really the past three years!), the Current Situation and Expectations components of the RPI both remain very close together, with January’s numbers being 102.7 and 102.8, respectively.
That agreement leaves us much more comfortable with the veracity of these indexes than during times when they are quite divergent. Both components were generally driven higher by sales and revenue items and lower by cost items — exactly what we would expect in a recovering economy. Same Store Sales (105.4) and Customer Traffic (104.6) were the big drivers of the Current Situation while Labor (100.5) was the drag. Same Store Sales (105.3) was also the big plus factor for expectations while Staffing and Capital Expenditures were the lesser contributors. Seventy per cent of operators reported higher same store sales in January while only 17 per cent reported lower ones. The share expecting higher sales in the next six months grew two per cent to 57 in January.
Only four per cent of operators expect lower sales over that period. Survey respondents are not quite so optimistic about the general economy with the share expecting better conditions in the next six months falling two per cent to 35. That number compares to 41 per cent back in December. The share expecting worse economic conditions six months hence grew three per cent in January to 10. With the caveat of these cautious expectations, the January RPI data continue to look quite positive.
Both of the indexes of consumer attitudes that we monitor declined in February but neither setback is at all indicative of a trend change. The Conference Board’s Consumer Confidence Index fell from 102.9 in January to 96.4 in February. That level, though, remains well above December’s 93.1 and is the second highest (to January) since October 2007. Both the Present Situation (3.7 points) and Expectations (9.8 points) indexes contributed to the decline. The Expectations decline was driven by a lower percent? age of respondents expecting improvement in economic conditions.
As was the case for the RPI, respondents to the Conference Board survey were “considerably less positive” in February in their short-term outlook for business conditions and were somewhat less optimistic regarding the labor market over the next six months. The University of Michigan’s Consumer Sentiment Index declined to 95.4 in February from January’s 98.1. The February level is sill 16.9 per cent higher than one year ago, however. The overall index was impacted about equally by the Current Conditions and Expectations components. The MU report cited harsh weather as a driver in that the declines in the North? east and Midwest were 3X the overall decline while Southern residents’ optimism grew.
Of note: “Importantly, there was little change in favorable expectations for continued growth in the economy over the longer term.”
TheCattleSite News Desk