NABE Survey Shows U.S. Economy’s Decline Abating
April 2009
The April 20, 2009, NABE Industry Survey report presents the responses of 109 NABE members to a survey conducted between Mar. 23, 2009, and Apr. 1, 2009, on business conditions in their firm or industry, and reflects first-quarter 2009 results and the near-term outlook.
Comments: “NABE’s April 2009 Industry Survey provides fresh evidence that the U.S. economy’s recession is abating,” said Sara Johnson, IHS Global Insight. “Key indicators—industry demand, employment, capital spending, and profitability—are still declining, but the breadth of decline is narrowing. Declines still outnumber gains, but fewer firms are reporting declines and more are reporting gains. This suggests that the economy is at an inflection point but has not yet reached a turning point. In January, our survey’s barometers for industry demand and capital spending hit their lowest levels in the history of the survey, dating back to 1982. The April survey showed better (less negative) results for industry demand, profit margins, employment, capital spending, and credit conditions. For example, the net rising index for industry demand—the percentage of respondents who reported rising demand minus the percentage who reported falling demand—improved from -28 to -14 as conditions in the financial and service sectors stabilized. Labor market conditions are still quite weak, with employment falling and wages stagnant. Over the next six months, 33% of firms plan to reduce employment, while only 16% plan to add workers and half expect no change in payrolls. NABE survey respondents have become more pessimistic about U.S. economic growth in 2009. Over half expect real GDP to fall by 2.0% or more this year, and only 7% expect any positive growth.”
Highlights
- Industry demand continued to drop in the first quarter of 2009, with 41% of survey respondents reporting decreases and only 27% reporting increases. Two-thirds of firms in the goods-producing sector and the transportation, utilities, information, and communications sector reported falling demand. Yet the overall results represented an improvement from the previous survey.
- Respondents continued to grow more pessimistic about the macroeconomic outlook. Ninety-three percent of respondents expect U.S. real GDP to decline in 2009, and over half expect a drop of 2% or more.
- Deteriorating global market conditions have hammered business profits. For the fifth consecutive quarter, reports of falling profit margins (45% of respondents) outnumbered reports of rising margins (14%).
- Job losses continued in the first quarter, as 39% of firms cut payrolls, while only 14% added workers. Looking ahead, 33% of companies plan to reduce payrolls over the next six months, while only 16% plan to increase employment.
- In the April survey, a higher percentage of firms reported increasing capital spending over the last three months than in January. Nevertheless, cutbacks in capital spending still outnumbered increases.
- Firms showed slightly less trepidation about future capital spending. In January, no firm planned to increase capital spending by more than 10% over the ensuing 12 months. This quarter, 6% of firms expected to raise capital spending by more than 10% and 21% of firms planned an increase of some kind over the next year.
- The extent of price-cutting diminished some in the first quarter. Moreover, expectations for further near-term price cuts appear to be diminishing. Last quarter, 33% of firms expected their selling prices to fall, compared to just 14% of firms that expected prices to rise over the next three months. In April, results were evenly balanced, with 17% of firms expecting their prices charged to fall while 16% expected their prices charged to rise.
- For the second consecutive quarter, more firms reported falling material costs than rising costs. Rising unemployment is dampening labor increases. For the first time in the history of the survey, more firms were reducing wages and salaries than were raising pay.
- Tightness in credit market conditions eased somewhat from the January survey. However, 45% of respondents still indicated that the tightening of credit conditions had moderately or severely affected their businesses in the first quarter, while 78% (same as the January survey) reported that credit conditions had adversely affected their customers.
- Among those who responded, three-fifths of firms were reducing inventories in the first quarter, either in anticipation of weaker sales or in an effort to cut costs and conserve cash.
The entire Industry Survey, including the complete answers and historical data, is for NABE members only.
Not a NABE member? Join NABE today!