The July Industry Survey report from the National Association for Business Economics (NABE), Washington, D.C., reveals that companies are preparing for fewer job losses and decreases in capital budgets over the next six to 12 months. Of the 102 NABE members surveyed on business conditions in their firm or industry for second-quarter 2009 results and the near-term outlook, 45% reported that sales had hit their cyclical low in the first half of 2009 or earlier, while 41% put the trough in the second half of 2009. A little more than half of the respondents (56%) expect real GDP to fall by 2% or more this year, and only 6% expect any positive growth. The vast majority of NABE panelists expect their companies’ sales to begin rising in 2010. Only 14% expect that sales will reach their low point in 2010 or later.

“NABE’s July 2009 Industry Survey provides new evidence that the U.S. recession is abating, but few signs of an immediate recovery,” says Sara Johnson, IHS Global Insight. “Industry demand was still declining in the second quarter of 2009, but the breadth of decline had narrowed considerably since late 2008, raising prospects for stabilization in the second half. Businesses were aggressively cutting costs this spring by trimming payrolls, inventories, and capital spending.”

July 2009 Industry Survey highlights:

  • Overall industry demand appears to be stabilizing. During the second quarter of 2009, gains in the unit volume of demand in the financial and services sectors offset declines in the goods-producing sector and transportation, utilities, information, and communications (TUIC) sector. All but the TUIC sector showed improvement from the previous survey.
  • NABE panelists are no longer marking down their forecasts of 2009 economic growth. Some 94% of respondents expected real GDP to decline or hold steady in 2009, with a plurality of 38% forecasting a contraction of 2% to 2.9%.
  • Dismal global market conditions continue to hammer business profits. For the sixth consecutive quarter, reports of falling profit margins (36% of respondents) outnumbered reports of rising margins (19%).
  • Job losses continued in the second quarter, as 36% of firms cut payrolls, while only 6% added workers. The percentage of firms adding jobs is at the lowest level seen since the survey began in 1982. Looking ahead, 18% of firms plan to increase payrolls in the coming year, while 28% anticipate reductions.
  • The number of firms cutting capital spending over the past quarter still outweighed the number of firms increasing capital spending. Only 8% of firms reported rising capital spending in the last quarter, the lowest proportion in the history of the survey. Looking forward, more firms are willing to undertake capital expenditures in the year ahead but cuts still outnumber increases.
  • For the third consecutive quarter, a higher percentage of respondents reported price reductions than price increases resulting in a Net Rising Index (NRI) of -13. Most firms expect to hold their prices steady over the next three months.
  • Material costs were relatively stable in the second quarter, while rising unemployment continued to dampen labor cost increases. For the second time in the history of the survey, more firms were reducing wages and salaries than were raising pay.
  • 54% of respondents indicated that tight credit conditions had a moderate or significant negative impact on their businesses during the second quarter of 2009, up from 45% in the first quarter.
  • Two-thirds (67%) of respondents said that they were reducing inventories during the second quarter, primarily to cut costs and conserve cash.
  • Although there is not wide agreement on a specific quarter, 45% of firms believe their company has already seen the cyclical low in company sales, while the other 55% believe this low point will occur sometime after the second quarter of 2009. Only 14% expect sales will bottom in 2010 or beyond, suggesting that there is general consensus of a 2009 trough.