Daily News: June 21, 2012

Franchise Business Index ‘Moving in Right Direction’

The Franchise Business Index (FBI)-an index of the economic health of the franchise sector-showed a gain of 0.3% in May, the eighth gain in the last nine months, the International Franchise Association announced today. The index increased to 108.7 (Jan 2000=100). This is a 1.8% increase compared with May 2011.

“Trends in the index over the last several months show that we are slowly, but steadily moving in the right direction,” said IFA president & CEO Steve Caldeira. “However, a still tight credit market, weak consumer spending and the continued policy uncertainty in Washington, particularly in the area of taxes, are stifling job creation.” While the index is slightly more optimistic this month, the looming Supreme Court decision on the health care law is also making our members more cautious, and the FBI is confirming that.”

IHS Global Insight senior economist James Gillula commented that, “While a return to recession in some European countries and slower growth in China pose a threat to U.S. growth, the lower oil prices that have accompanied these developments are a saving grace and will be a plus for U.S. disposable income the rest of 2012.”

Revised data for April were also incorporated for all index components, and the April index value was revised upward by 0.1% to 108.4.

Continued gains in employment in franchise-related industries and consumer demand for franchise industry products and services contributed to the May increase in the FBI. Although the pace of job growth has slowed economy-wide, employment in some sectors where franchise businesses are concentrated, such as lodging, quick-service restaurants and retail food services, has been more resilient. Monthly changes in the business credit conditions component of the FBI have been volatile recently, and May’s change largely reversed the improvement seen in April. An up-tick in the unemployment rate also had a negative impact on the FBI this month.