Durango, Colo., July 16 - Chocolate may be a comfort in troubled times but even this affordable luxury is feeling the pinch of slower economic growth in the United States.
"Chocolate tends to be a recession-proof business but we're not immune to the consumer," said Bryan Merryman, chief operating officer of Rocky Mountain Chocolate Factory Inc , with 292 stores nationwide and 38 in Canada.
Chocolate may be a good barometer of the way many U.S. businesses probably feel about the current economic climate.
It is made from imported cocoa, whose price on world markets has surged as the dollar has weakened. It is costly to distribute, and those expenses have climbed with rising fuel prices. And it is a pure consumer good sold to customers feeling the pain of precisely the same pressures.
All of which adds up to a simple and sobering verdict about the real state of the U.S. economy.
"We started into recession -- I don't care what the government calls it -- in our fourth quarter," Merryman told directors and staff from the Federal Reserve Bank of Kansas City this week during a visit to the chocolate factory, located on a mountainside in this popular ski resort.
Technically speaking, the U.S. economy has so far not suffered two consecutive quarters of contraction that is the traditional hallmark of a recession. But it faces serious headwinds from the weak housing market and higher energy and food costs, and may yet stumble.
U.S. retail sales rose only a disappointing 0.1 percent in June, despite billions of dollars of tax rebates siphoned to households in an emergency government stimulus package to prop up growth.
It was a worrying sign that the hitherto stalwart U.S. consumer was hesitating to spend. The service sector accounts for roughly 80 percent of U.S. economy and a serious slowdown in consumption would be a tough burden to shrug off.
The Kansas City Fed allowed several reporters to join its visit to the Rocky Mountain Chocolate Factory on Tuesday afternoon. Like all of the 12 regional Federal Reserve banks, the Kansas City Fed conducts regular field trips to talk with local businesses, synthesizing the information and feeding it into the debate over interest rate policy back in Washington.
Anecdotal information from business contacts forged in communities all over the country is also systematically collected and published in the Fed's Beige Book, which gives policy-makers early warnings on changes in the real economy way before these show up in national data.
A critical prop to consumer spending is the level of employment. But as businesses lay off workers to protect profit-margins against mounting input costs, U.S. unemployment has crept up to 5.5 percent and many see it going higher.
As a franchise-based operation that earns a royalty from retail sales, Merryman said Rocky Mountain Chocolate struggles to pass higher costs on to its franchise network. That fact was duly noted by Kansas City Fed President Thomas Hoenig who, as a member of the Fed's interest-rate setting committee, always worries about inflation.
But as a result, the chocolate maker has shrunk its workforce to 165 from 220 a year ago; a tough blow for the local community where Rocky Mountain is an important employer.
It might not pay starting salaries as high as nearby Wal-Mart, said Emilie Wilson, an employee of 20 years who was dipping clusters of nuts into molten chocolate. But she got to clock more hours a week than at the retail giant, and she found the overtime in the peak summer months most welcome.
Elsewhere on the factory floor, where workers tend conveyor belts of flowing candies beneath pipes carrying molten chocolate, the job benefits can be very tangible.
"I gained 20 pounds in the first six months," complained Bonita Ratliff, who has worked with Rocky Mountain for nine years and now runs the internet ordering department, as she explained the art of making 'Rockypop'.