According to the January NABE Industry Survey, job losses continue to slowly abate, with the percentage of firms cutting payrolls falling to 28% from 31% in the October survey. The percentage of firms adding jobs edged higher to 13% while the share of respondents expecting their firms to add employees over the coming six months rose to 29% from 24%.
The January NABE Industry Survey report presents the responses of 75 NABE members to a survey conducted between December 18, 2009, and January 7, 2010, on business conditions in their firm or industry and reflects fourth-quarter 2009 results and the near-term outlook.
"NABE's January 2010 Industry Survey provides new evidence that the U.S. recovery from the Great Recession continues, albeit at a slow pace," said William Strauss, Federal Reserve Bank of Chicago.
"Industry demand edged higher from the October 2009 report with an improved view towards growth in 2010. While input costs have been increasing, prices have also been moving higher, allowing profits to continue to improve. Job losses have been moderating with a slightly improved outlook for hiring over the next six months. Capital spending has continued to improve from very low readings following the start of the financial crisis. Improving credit conditions might be part of the explanation, with many respondents indicating that credit still remains tight but less so than in recent month," Strauss added.
Highlights of the survey include:
- Industry demand increased for a second consecutive quarter. The goods-producing; finance, insurance, and real estate (FIRE); and services sectors all experienced growth in unit demand. While the transportation, utilities, information, and communications (TUIC) sector saw declining demand, the pace of decline slowed dramatically from early 2009.
- All respondents are again indicating that business decisions are being made based on expectations of positive economic growth in 2010, as measured by real GDP. Sixty-one percent of survey respondents believe real GDP will expand by more than 2.0% in 2010 -- up from 45% of respondents in October.
- Profit margins expanded for a second straight quarter, though the degree of improvement was again modest. A smaller share of respondents reported rising profitability compared to results in the October 2009 survey, but the proportion citing eroding margins decreased by an even greater amount.
- For the second straight quarter, price increases were more common than price cuts. Only 8% of respondents reported that their firms had cut prices last quarter, compared with 22% that had raised prices. Expectations for price increases in the coming quarter out-ran expected price cuts by 29 percentage points.
- The share of respondents whose firms increased their capital spending over the prior quarter dipped in Januarys survey, after rising sharply from July to October. Expectations for future capital spending improved for a fifth straight quarter, with positive responses outstripping negative answers three to one. As in the past three surveys, expectations were positive for spending on computers and communications equipment but negative for structures.
- Materials costs have increased. The percentage of respondents noting rising prices outpaced that of respondents reporting price declines. Labor costs remain subdued, with only 12% of respondents reporting rising compensation.
- A large but declining share of respondents indicated that credit conditions had a negative impact on their businesses during the fourth quarter of 2009, compared with the prior period. In addition, the number of panelists reporting a positive impact from credit conditions also increased.
- The majority of respondents (59%) indicated a reduction in inventories, roughly consistent with the previous surveys results. A smaller percentage of firms (22%) reported accumulating inventory because of weaker-thanexpected sales, suggesting that fourth quarter sales were in line with expectations for more companies. However, a higher number of firms reported reducing inventories in anticipation of weaker sales or a need to cut costs and conserve cash, suggesting some firms are leery of the near-term outlook. At the same time, 19% of firms reported building inventories in
anticipation of stronger sales -- one percentage point higher than in the October survey. - The vast majority (69%) of respondents reported the fiscal stimulus enacted in February 2009 has had no impact on employment to date. The vast majority (63%) also reported that concerns or uncertainty over health care, the environment, or tax legislation has had no impact on their 2010 hiring plans.
