By Paul Carton
Co-written by Jean Crumrine
ChangeWave’s latest corporate survey shows a stabilizing of the U. S. economy, with second quarter sales experiencing the biggest improvement in more than four years.
While the survey of 2,970 corporate respondents shows current U.S. sales are still contracting, there’s a dramatic lessening in the rate of decline. Coupled with broad improvements across a range of other key indicators – including capital spending, the job market and the third quarter sales pipeline – the picture points towards an end of the U.S. recession before the close of 2009.
Note that as we saw during the recovery from the 2001 business downturn, coming out of a recession can be quite a bumpy ride. So while the results of our May 20-June 2 survey are highly encouraging, we’ll be keeping a close eye out for any signs of backsliding in the coming months.
U.S. Economy Is Stabilizing
While 44% of respondents still project that their company sales will come in Below Plan for second quarter 2009 – that’s a big eight point improvement over the previous quarter. Moreover, 13% say their company sales will come in Above Plan – a four point improvement.
As the following chart shows, these second quarter sales projections represent the biggest improvement in a ChangeWave survey in more than four years.
The U.S. labor market is also showing signs of improvement. One-in-ten respondents (10%) report there are More new hires in their company at this point in the second quarter vs. last quarter – up three points since the previous survey. Only 22% say there are Less new hires – down eight points from previously.
Dramatic Improvement in Longer Term Outlook
We also asked respondents about their company sales pipeline projections for the third quarter, and found unmistakable signs of a dramatically improved outlook going forward.
A total of 18% say their company sales will come in Above Plan – which represents a seven point improvement over the previous survey – the biggest uptick in six years. At the same time, just 28% report they’ll come in Below Plan – ten points better than the previous survey.
While the net 17-point change is a huge improvement, the projections for the coming third quarter still show a sales contraction, so we’re not entirely out of the woods yet. But the results are another key indicator of a U.S. economic recovery by year’s end.
In another bullish signal, going forward we’re picking up a dramatic deceleration in the rate of capital spending decline. Twenty-six percent still project a decrease in their company’s third quarter capital budget, but that’s a major 15-point improvement over our previous survey.
At the same time, 9% project an increase in their third quarter capital budgets – a four point improvement and the first recorded uptick in a ChangeWave survey in 18 months.
Impact of the Credit Crunch. For the past 18 months we’ve been measuring the impact of the credit crisis on U.S. businesses – generally thought to be one of the key causes of the recession.
In our March survey we saw the first signs of stabilization, but in our current survey we find actual measurable improvement – a sign that the U.S. government’s attempts to open the credit spigot are starting to pay off.
One-in-four respondents (25%) continue to say that it is harder for their company to borrow money than it was 90 days ago – but that’s a five point improvement from the previous survey. Three percent now say it is easier to borrow money, two points better than previously.
To be clear, the credit crisis remains a huge problem, but for the first time since we began asking this question in December 2007, the crunch is showing signs of abating.
Our latest corporate survey has picked up clear signs of a stabilizing U. S. business economy. Not only are second quarter sales stabilizing, but we’re picking up broad improvements going forward across a range of other key indicators – including capital spending, the job market and the third quarter sales pipeline.
Further positive signs include the first easing of the U.S. business credit crunch that we’ve seen in 18 months.
Note that while the survey shows the U.S. economy is still contracting, there’s been a dramatic lessening in the rate of decline and the overall picture now points to an end of the U.S. recession before the close of 2009.
In terms of individual sectors, this is the second quarter in a row that the Semiconductor sector is showing major signs of momentum – more so than any of the other sectors surveyed – as the charts in the following article clearly point out.