Thinking About Thinking

The Grassroots Deli Economic Forecast

Posted in Economy, Pop Culture by larrycheng on October 20, 2009

When the market crashed over a year ago, I got pretty motivated to stay on top of global macroeconomic research.  So, I started reading about 7 different sources of economic forecasts and analysis.  As the year has progressed, I have narrowed in on a couple that I think are keepers.  My two favorites are The High Tech Strategist by Fred Hickey and some of the commentary of Jurrien Timmer who runs the Fidelity Dynamic Strategies Fund.  But, neither of them has replaced my true source of grassroots economic information, from appropriately named, Grassroots Deli.

Grassroots Deli is a hole in the wall deli across the street from my office on 183 Devonshire Street in Boston’s financial district.  They have great homemade muffins in the morning and a mean turkey platter for lunch.  The owner mans the register and she remembers everyone’s name and usual order.  It’s a little bit like Cheers – where everyone knows your name.  (BTW, this is for another blog post, but I think she’s cracked the code on customer retention in the restaurant business – good food and remember the customer’s name.)

Every once in awhile, I ask her how business is which is my gauge for the health of the economy.  Here are some tidbits of what she’s said over the past:

  • Summer 2008: She was feeling the effects of the vacancy level at 1 Federal Street.  She commented that the money managers spend a lot more money on lunch than the lawyers do – and it’s the money managers who left the building.  I guess money managers are OK paying $10+ for lunch which is important in her business.  She was also feeling the pain of the high oil prices which led to fuel surcharges tacked on by her food suppliers.
  • Fall/Winter 2008: Feeling the sting of many layoffs around the downtown – deer in headlights.  Even more infuriating was the continued oil surcharge from food suppliers despite oil falling from $100/barrel to $35/barrel.
  • Summer 2009: Business demand is still well below average, but what’s hurting her business is the price of sugar.  Sugar had climbed from $0.12/pound to $0.18/pound inside of a year.  Climbing commodity prices across the board are hurting her margins since she can’t raise her prices.  Profits are being squeezed at the cost of goods line – business is tough.

I got my latest update today:

  • Fall 2009:  Hopes of a pick-up in business after Labor Day have now faded.  Business is still very slow.  She said her paper supplier who has been working the Boston and Cape Cod region for 38 years said his business in Cape Cod fell by more than $1 million year over year.  It’s at it’s worst point in 38 years.

Well, the food is great at Grassroots Deli, but business is still challenging.  Her business is probably a microcosm of many different businesses as she is doing a great job servicing her customers but there are things out of her control.  Her little business illustrates the fundamental and wide-ranging impact of things like commercial vacancy rates, rising commodity prices, and high unemployment.  I’m definitely rooting for a better forecast next time.  Official Grassroots Deli Economic Forecast: not out of the woods yet.