Survey Says No Recession In Sight

It wouldn’t be the first time the conventional wisdom was wrong.

According to a recent Wall Street Journal/NBC News poll, more than two-thirds of Americans think the U.S. economy is either in recession now or will be in recession within the next 12 months.

But our latest ChangeWave quarterly sales survey shows only a slight reduction in corporate sales growth for the third quarter, coupled with a dip in capital spending.

A reduction? Yes. But a recession? No way.

Our survey found that three-in-10 respondents (30%) are still projecting their company sales will come in Above Plan for the third quarter. That’s just 1 percentage point less than in the previous quarter. Another 24% report their company sales will come in Below Plan – only 2-pts worse than previously.

The ChangeWave survey of 3,505 Alliance members was conducted August 27–September 5, and while the findings certainly don’t show a boom in corporate sales they also don’t signal a bust.

As the following chart shows, overall sales growth for the current quarter is down only slightly from the previous quarter (June 2007).

How does that compare with corporate sales during a recession?

This next chart is drawn from the ChangeWave quarterly sales surveys conducted during a 12 month period in 2001 and 2002. Note that an actual recession was taking place between March and November 2001.

It’s clear when you compare the data from these very different economic periods, that whatever you want to call the current quarter – a reduction, a slowdown, etc. – the one thing you can’t call it is a recession. Let’s reserve that term for real downtrends such as we witnessed in 2001-2002.

That said, the current survey does expose areas of real concern.

Digging into the Details

Drilling down deeper we see that for the third consecutive survey there has been a reduction in the capital spending growth rate going forward.

Only 15% of respondents are projecting an increase in their overall capital budget for the fourth quarter. That’s 1-pt less than previously. At the same time, 15% expect a decrease, 2-pts worse than last quarter. We note these results are exactly the same as a year ago.

Other Key Findings

* 4Q Sales Pipeline Projections: There is somewhat reduced visibility going forward. Just under a third of respondents (32%) say their sales pipeline projections are Above Plan for the fourth quarter, 1-pt less than previously. At the same time, 15% report they’ll come in Below Plan, 2-pts worse.

* Sluggish Labor Market: In another bearish sign, only 24% say there are More new hires in their company at this point in the third quarter vs. last quarter – a 2-pt decline from the previous survey. Moreover, 16% now say there are Less new hires – up 2-pts.

* Positive News on the Inflation Front: Alliance member companies typically tend to see downward price pressures on their products, because many are in the IT sectors and related markets. While our previous survey showed upward (i.e., inflationary) price pressures, the current one shows them easing, with only 15% saying prices are rising for their company’s products – down 2-pts from last quarter.

So What Does it All Mean?

Yes, our current survey results show a slight reduction in 3rd quarter sales growth, a slightly slower labor market, and somewhat weaker visibility and capital spending going forward.

But these are all mild reductions that in no way resemble the devastatingly weak data we saw during the last recessionary period.

Now factor in the Fed’s recent half-point rate cut and it’s even clearer that the conventional wisdom that we’re entering a recession is, indeed, wrong.

We’ll keep you posted on these trends going forward, but as of now we see no recession in sight.

Jim Woods co-wrote this article.

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This article summarizes the results of a recent ChangeWave Alliance survey. The Alliance is a research network of 10,000 business, technology and medical professionals who spend their everyday lives working on the front line of technological change. For more info on the ChangeWave Alliance, or if you are interested in joining, please click here.

Comments

[NoFate]

If you are going to show charts, show the WHOLE chart!

You are comparing the numbers right after the NASDAQ crash and 9/11 to today and then draw conclusions from this?

The poll said that 2/3 of Americans thought they were in a recession or would be IN THE NEXT 12 months. That means you have to also show the 12 months prior to March 2001 to accurately compare. I'm guessing they don't look too different from today huh?

[fodi MD.]

Nice BS You slice nice baloney and create Steak