Survey shows improving business conditions—pickup in hiring, capital spending—over next six months

The October 26, 2009, National Association for Business Economics (NABE) Industry Survey report, based on responses of 78 NABE members to a survey conducted between Oct. 2 and Oct. 12, 2009 about business conditions reflects third-quarter 2009 results and the near-term outlook.

According to NABE, the survey shows improving business conditions with a pickup in hiring and capital spending planned over the next six months.

Industry demand increased during the July to September period for the first time in five quarters. The goods producing; financing, insurance, and real estate (FIRE); and services sectors all saw growth in the unit volume of demand. The transportation, utilities, information, and communications (TUIC) sector was the only broad industry group to post a decline.

Profit margins widened for the first time in seven quarters, albeit at a modest pace. While goods-producing industries continued to experience compression in profit margins, the other three broad industry groups all recorded gains.

Price increases were more common than price cuts last quarter for the first time in a year. The share of respondents expecting price increases in the next three months exceeded the share expecting cuts by 15 percentage points, a margin not seen since July 2008.

Job losses appear to be slowly abating with the percentage of firms cutting payrolls falling to 31 percent from 36 percent. The percentage for firms adding jobs doubled from an all-time low of 6 percent in July to 12 percent in October. Respondents expecting their firms to add employees over the coming six months exceeded the number expecting job cuts for the first time since the recession began.

For the first time since October 2008, more respondents reported a rise in capital spending over the prior quarter than a decrease. Expectations for future capital spending improved for the fourth straight quarter and turned positive, on balance, for the first time in a year. As in the past two surveys, expectations were positive for spending on computers and communications equipment but negative for structures.

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A large but declining share of respondents indicated that credit conditions had a negative impact on their businesses during the third quarter of 2009, compared to the prior period. In addition, the number of panelists reporting a positive impact from credit conditions has also increased.