After nearly doubling from a record-low 28% in the first quarter of 2009 to 55% by the third quarter, the share of survey respondents with a positive business outlook increased to 60% in the fourth quarter (see Chart 2). Assuming that the recession ended in the second quarter of 2009, the level of confidence in the fourth quarter is 15 percentage points below the 75% that had a positive business outlook in the second quarter of 2002, two quarters after the end of the 2001 recession (see dotted red line in Chart 2).
While the continued improvement in companies' business outlook in the fourth quarter is a positive sign, firms remain tentative with respect to the outlook over the coming year.
As Table 1 shows, the vast majority (93%) of the change in the business outlook from the first quarter to the fourth quarter has been from "Very" or "Somewhat Negative" to "Somewhat Positive". The share of respondents that was "Very Positive" edged up from 3% in the first quarter to just 5% in both the third and the fourth quarters.
The fact that the share of respondents who classified their outlook as "Very Positive" did not increase in the fourth quarter is a warning sign that manufacturers do not expect the recovery to accelerate significantly over the coming year and corroborates the survey's initial question, where a majority (52%) of survey respondents expect a downturn in their company's production to last into at least the second half of this year.
Business Outlook Detail
The confidence level (the share of survey respondents with a positive business outlook) of manufacturers has gone through six cycles since the survey began in late 1997:
In the tail end of the 1990s expansion, the percent of survey respondents with a positive outlook averaged around 80%.
During the 2001 recession, confidence fell to 58.8%.
During the 2002-2003 period, a slow initial recovery held confidence down at 70.6%.
It was not until 2004-2005, when the manufacturing recovery picked up significant momentum, that confidence increased to an average level of 87.6%.
After peaking at 91% in the fourth quarter of 2005, confidence began to moderate in 2006 and 2007, as the housing market began to falter and energy prices began to rise.
Since the current recession began at the end of 2007, manufacturers' business outlook eroded significantly through the first quarter of 2009 but began improve in the second quarter.
