New NABE Survey Shows Business Recovery Gaining Momentum, with More Jobs Ahead
The NABE April 2010 Industry Survey report presents the responses of 68 NABE members to a survey conducted between March 25, 2010, and April 10, 2010, on business conditions in their firm or industry and reflects first-quarter 2010 results and the near-term outlook.
“NABE’s April 2010 Industry Survey confirms that the U.S. recovery from the Great Recession continues, with business conditions improving,” said William Strauss, Federal Reserve Bank of Chicago. “Industry demand moved higher compared to results in the January 2010 report, pointing to stronger growth in 2010. While input costs have been increasing, prices have also been moving higher, allowing profits to continue to rise. After more than two years of job losses, job creation increased in the first quarter of 2010, suggesting a better outlook for hiring over the next six months. Little of the improvement to date in job growth can be attributed to the stimulus bill enacted in February 2009. Capital spending remained steady. Tight credit conditions continued to negatively impact business conditions.”
Highlights
- Industry demand increased for a third consecutive quarter. Fifty-seven percent (57%) of April survey respondents reported rising demand versus only 6 percent reporting falling demand as the NRI jumped to its highest level in more than four years to 51. All four major industry sectors experienced strong demand growth.
- More than half of the NABE survey respondents said that some portion of their firms’ sales came from foreignbased operations, with 14% indicating that more than half of their sales were from foreign sources. Of those with sales from foreign operations, 42% indicated their sales increased in the last quarter, while 17% reported they decreased.
- Expectations for economic growth in 2010 have improved significantly. All NABE panelists again indicated business decisions are being made based on expectations for positive economic growth (as measured by real GDP) in 2010. Twenty-four percent (24%) of survey respondents believe real GDP will expand by more than 3%, and 70% of respondents believe the economy will expand by more than 2.0% in 2010.
- Profit margins expanded for the third quarter in a row. Twenty-five percent (25%) of survey respondents reported increased profitability versus 11% that reported declines. Three of the four major sectors posted higher margins than in January. Slightly more firms than in the previous quarter (18% vs. 17%) cut prices than raised them. This is a reversal from results in the past two surveys. In addition, fewer firms expect to raise prices in the coming quarter than had expected to do so in the January survey.
- Job creation increased for the first time in the past two years of this NABE survey. The percentage of firms increasing payrolls rose to 22% from 13% in the January survey. The percentage of firms cutting jobs moved lower—from 28% in January to 13% in April. The share of respondents expecting their firms to add employees over the coming six months rose to 37%, up from 29% in the previous survey.
- The share of respondents whose firms increased their capital spending over the prior quarter held nearly steady from the past two surveys—at 25%. Expectations for future capital spending deteriorated after improving for five straight quarters, although positive responses still exceeded negative ones by 41% to 22%. As in the past four surveys, expectations were positive for spending on computers and communications equipment, but negative for spending on structures.
- Materials costs continue to rise. The percentage of respondents reporting rising prices outpaced that of respondents reporting price declines. Labor cost pressures also continued to increase, with respondents reporting the highest NRI in more than two years.
- Credit conditions continue to hamper firms. Despite improvements throughout the economy, a large share of respondents continue to report that credit conditions had a negative impact on their businesses during the first quarter of 2010.
- The vast majority (73%) of respondents reported the fiscal stimulus enacted in February 2009 has had no impact on employment to date. While 68% also believe a jobs bill, such as the one recently enacted into law, will have no impact on payrolls, 30% do believe it will boost payrolls moderately.
The entire Industry Survey, including the complete answers and historical data, is for NABE members only.
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