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Tue, Apr 21, 2009 - Page 10 News List

US declining, but recession abating

KEY INDICATORS A National Association for Business Economics survey showed that US pessimism had grown, with 93 percent saying that GDP would decline


The US economy is still in decline but results from a new survey show evidence the recession is abating as more companies see rising demand for their products, taper plans for job cuts and report profit margins on the uptick.

The latest quarterly survey by the National Association for Business Economics (NABE), released Monday, indicates that the economy is at an inflection point, but not quite a turning point, said Sara Johnson, NABE’s lead analyst on the survey and an economist at IHS Global Insight.

However, she said, the results show the recession is abating.

“Key indicators — industry demand, employment, capital spending and profitability — are still declining, but the breadth of decline is narrowing,” she said.

The results mirror announcements by the US Federal Reserve last week that there were some faint signs of hope that the economy was improving. The Fed said five of its 12 regional banks reported the pace of economic decline was moderating.

Still, the NABE survey of companies and trade associations showed that pessimism about US economic growth was rising, as 93 percent of respondents expected real GDP to decline this year. That was worse than 78 percent in the previous survey in January.

But signs are improving. In the latest quarterly survey, more companies reported rising demand for their products, while fewer companies reported a decline. The net rising index for industry demand — which measures the difference of those two numbers — improved to 14 percent this month from 28 percent in January. The January figure, the survey noted, was the worst reading since the survey began in 1982.

Net rising indexes swung from negatives to slight positives for the finance, insurance and real estate, and services sectors, while demand remained depressed in transportation, utilities, information and communications.

More companies are also seeing their profit margins increase. In the latest survey, 14 percent of respondents said their profit margins were rising, while 45 percent said they were falling. The rest said they were unchanged, meaning the net rising index was 30 percent, an improvement from January’s 41 percent, when only 10 percent of respondents reported rising profit margins and 52 percent reported declines.

Capital spending — which is tied to business growth — improved as 15 percent of respondents reported boosting capital spending in the last three months, up from 12 percent in January. But the majority of respondents, 54 percent, were leaving capital spending unchanged, and the rest — 31 percent — were cutting back.

Employment prospects are still down, too, and wages are at their lowest point since the survey began 27 years ago.

This month, 14 percent of companies reported employment had risen — the same as in January. The number of companies reporting lower employment totaled 39 percent, down from 44 percent. Goods-producing industries fared the worst, with 83 percent reporting job losses and none reporting growth. The financial, investment and real-estate sector showed signs of stabilizing.

The outlook for jobs remains grim, with losses expected to continue in the next six months. Only 16 percent of companies predicted an increase in hiring at their firms, slightly worse than the 17 percent in January. But the number of companies predicting job losses improved to 33 percent from 39 percent.

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