ChangeWave Research: 4Q 2012/1Q 2013 Corporate Quarterly Survey
ChangeWave Research Report:
4Q 2012/1Q 2013 Corporate Quarterly Survey
Sluggish U.S. Economic Growth Caused by Fiscal Cliff Uncertainty
Jean Crumrine and Paul Carton
Overview: ChangeWave’s latest corporate quarterly survey shows a tightening U.S. economy, led by lower 4th Quarter sales growth, a reduced 1Q sales pipeline, and a slower jobs market. ChangeWave Research is a service of 451 Research.
The November 19-December 11 survey of 2,505 corporate respondents also shows slightly weaker capital spending, with uncertainty caused by the Fiscal Cliff continuing to impact U.S. economic growth.
The tighter economy is also resulting in downward price pressures. While good news for consumers, lower prices produce declining business margins as well. On a more hopeful note, the availability of credit remains at its highest level of the past four years.
Sluggish U.S. Economic Growth
4th Quarter 2012 Sales: Just under one-in-five (19%) respondents say their company sales will come in Above Plan for 4th Quarter 2012 – unchanged from the previous quarter. Another 35% say their company sales will come in Below Plan – 2-pts worse than previously.
Putting The Findings in Context: As the following chart shows, this is the third survey in a row featuring tighter corporate sales growth – down a net 2-pts compared to last quarter.
Customer Spending: We also asked respondents to rate the current willingness of their existing customers to spend money on their company’s products and services. A total of 61% say their customers have either a Yellow Light to spend (i.e., spending is downsized, though not completely stopped) or a Red Light (i.e., spending is virtually on hold) – 1-pt worse than the previous quarter.
One-in-three (33%) report their customers have a Green Light to spend (i.e., spending is normal) – unchanged since previously.
Job Market: In a worrisome survey finding, we’re seeing a tightening of the U.S. labor market this quarter. Only 16% report there are More new hires in their company at this point in the 4th Quarter vs. last quarter – 2-pts worse than previously.
Another 17% report Less new hires – unchanged from previously.
Note there has been a decline in hiring among medium-sized to larger companies since the previous survey, while small-sized companies (less than 10 employees) remain least likely to report More new hires.
Capital Spending: We usually see a seasonal increase in cap spending at this time of year, but in another sign of tightening growth only 12% of respondents project an increase in their 1st Quarter capital budget while 22% project a decrease – a net 1-pt worse than previously.
Impact of Fiscal Cliff: With hundreds of billions of dollars of tax increases and spending cuts set to occur at year’s end if Congress fails to act on the Fiscal Cliff, corporate fears continue to damage the U.S. economy.
Thinking about your company’s overall Capital Budget for 1st Quarter (Jan-Mar) 2013, is the “Fiscal Cliff” issue and associated uncertainty causing your company to increase its overall Capital Budget, decrease its overall Capital Budget, or is it having no impact on your overall Capital Budget for 1st Quarter vs. the current quarter?
Current SurveyDec ‘12 / Previous Survey
Sep ‘12
Decrease in 1st Quarter Capital Budget Because of "Fiscal Cliff" Issue and Associated Uncertainty / 29% / 25%
Increase in 1st Quarter Capital Budget Because of "Fiscal Cliff" Issue and Associated Uncertainty / 2% / 3%
No Impact on 1st Quarter Capital Budget / 52% / 52%
Don't Know / 17% / 20%
When we asked U.S. corporate respondents whether the Fiscal Cliff issue was causing any adjustments to their overall 1st Quarter capital budgets, 29% said it had caused their company to Decrease their 1st Quarter capital budgets – 4-pts worse than three months ago.
We also asked about the impact on 1st Quarter cap budgets if the Fiscal Cliff issue was suddenly resolved.
And if the ‘Fiscal Cliff’ issue was resolved today, what impact – if any – would this have on your company’s overall Capital Budget for 1st Quarter (Jan-Mar) 2013? Would it cause your company to increase its overall Capital Budget, decrease its overall Capital Budget, or would it have no impact on your company’s overall Capital Budget for 1st Quarter vs. the current quarter?
Current Survey Dec ‘12Decrease in 1st Quarter Capital Budget if “Fiscal Cliff” Issue is Resolved / 5%
Increase in 1st Quarter Capital Budget if “Fiscal Cliff” Issue is Resolved / 18%
No Impact on 1st Quarter Capital / 58%
Don’t Know / 20%
By a better than three-to-one margin, more respondents say their company’s 1st Quarter cap budget would Increase (18%) rather than Decrease (5%) if a Fiscal Cliff resolution were to be reached today. While this is further evidence of the negative drag on the economy caused by Fiscal Cliff uncertainty, it also points out the huge, instantaneous boost a resolution would likely provide to U.S. economic growth going forward.
1st Quarter 2013 Sales Pipeline: Sales pipeline projections for the 1st Quarter are looking tighter as well, with just 17% saying their company sales will come in Above Plan and 21% Below Plan – a net 3-pts worse than the previous survey.
Availability of Credit: On a hopeful note, the availability of credit remains at its highest level of the past four years. A total of 8% of respondents say it is now easier for their company to borrow money than it was 90 days ago – 1-pt better than previously, while 13% say it’s harder to borrow money, 1-pt worse.
* Note: 53% of respondents report there has been No Change in their company’s ability to borrow money.
Price Pressures: Once again we’re seeing downward pressure on the prices companies are charging for their products. Only 14% report prices are Rising for their company’s products, down 2-pts from last quarter. At the same time, 19% report prices are Falling – up 4-pts.
*Note that 58% report their company’s prices are holding firm in the marketplace.
Importantly, downward price pressures represent a double-edged sword – while good news for consumers, lower prices produce declining business margins as well.
Bottom Line: ChangeWave’s latest corporate quarterly survey shows a tightening in U.S. economic growth, led by lower 4th Quarter sales, a reduced 1Q sales pipeline, weaker capital spending and a slower jobs market.
Importantly, the results confirm several recent ChangeWave surveys that have shown the Fiscal Cliff issue is exacting a toll on U.S. business growth.
While the corporate economy remains bogged down, the U.S. consumer economy continues to show hopeful signs. And our ChangeWave survey results point to a clear boost in business momentum once the U.S. Fiscal Cliff issue is successfully resolved.
Most of the individual sectors remain flat compared to last quarter – but two stand out as showing signs of improvement: Technology/Networking Hardware and Semiconductors. A follow-up ChangeWave report will present the details on these and other sectors.
Summary of Key Findings
The ChangeWave Research Network is a group of 25,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.
Table of Contents
Summary of Key Findings 6
Key Findings 8
· 4Q 2012 Sales Results 8
· Last 12 Years Comparison 8
Current Willingness of Customers to Buy Products 9
Hiring Trends in the 4th Quarter 10
· 4Q 2012 Hiring Trends – A Comparison 10
· Hiring Trends By Company Size 11
Layoff Trends in the 4th Quarter 11
· 4Q 2012 Layoff Trends – A Comparison 11
Capital Spending Growth Rate 12
· Overall 1Q Capital Budgets – A Comparison 12
· Impact of the Fiscal Cliff Issue 12
What’s in the Pipeline? 14
· Overall Sales Pipeline Projections – A Comparison 14
· Last 12 Years Comparison 14
Availability of Credit 15
· Ability of Companies to Borrow Money – A Comparison 15
Price of Products 16
· Price Pressures in the Current Marketplace 16
· Ability of Companies to Purchase Commodities 16
· Companies Offering Discounts on Products/Services 17
Additional Findings and Highlights 18
4th Quarter Cancelled Orders 18
Product Inventories for the 4th Quarter 19
Backlog of Orders for the 4th Quarter 20
ChangeWave Research Methodology 21
About ChangeWave Research 21
About 451 Research 21
I. Key Findings
Introduction: ChangeWave’s latest corporate quarterly survey shows a tightening U.S. economy, led by lower 4th Quarter sales growth, a reduced 1Q sales pipeline, and a slower jobs market. ChangeWave Research is a service of 451 Research.
The November 19-December 11 survey of 2,505 corporate respondents also shows slightly weaker capital spending, with uncertainty caused by the Fiscal Cliff continuing to impact U.S. economic growth.
The tighter economy is also resulting in downward price pressures. While good news for consumers, lower prices produce declining business margins as well. On a more hopeful note, the availability of credit remains at its highest level of the past four years.
Sluggish U.S. Economic Growth
4th Quarter 2012 Sales: Just under one-in-five (19%) respondents say their company sales will come in Above Plan for 4th Quarter 2012 – unchanged from the previous quarter. Another 35% say their company sales will come in Below Plan – 2-pts worse than previously.
Putting The Findings in Context: As the following chart shows, this is the third survey in a row featuring tighter corporate sales growth – down a net 2-pts compared to last quarter.
Current Willingness of Customers to Buy Products
Customer Spending: We also asked respondents to rate the current willingness of their existing customers to spend money on their company’s products and services.
A total of 61% say their customers have either a Yellow Light to spend (i.e., spending is downsized, though not completely stopped) or a Red Light (i.e., spending is virtually on hold) – 1-pt worse than the previous quarter.
One-in-three (33%) report their customers have a Green Light to spend (i.e., spending is normal) – unchanged since previously.
Hiring Trends
We also asked respondents about hiring trends in their company for the quarter.
Question Asked: We are two-thirds through 4th Quarter 2012. How would you characterize the number of new hires (full or part-time payroll employees) in your company at this point in 4Q 2012 compared with the same point in the previous quarter (3Q 2012)?
Hiring Trends / Current Survey4Q 2012 / Previous Survey
3Q 2012 / Previous Survey
2Q 2012 / Previous Survey
1Q 2012 / Previous Survey
4Q 2011
More new hires at this point in 4Q 2012 compared to 3Q 2012 / 16% / 18% / 19% / 18% / 16%
Less new hires at this point in 4Q 2012 compared to 3Q 2012 / 17% / 17% / 14% / 13% / 16%
Equal amount of new hires in 4Q 2012 compared to 3Q 2012 / 20% / 21% / 21% / 20% / 21%
No new hires at this point in either 4Q 2012 or 3Q 2012 / 42% / 38% / 39% / 40% / 40%
Don’t Know / No Answer / 6% / 6% / 7% / 8% / 7%
Job Market: In a worrisome survey finding, we’re seeing a tightening of the U.S. labor market this quarter. Only 16% report there are More new hires in their company at this point in the 4th Quarter vs. last quarter – 2-pts worse than previously. Another 17% report Less new hires – unchanged from previously.
Note there has been a decline in hiring among medium-sized to larger companies since the previous survey, while small-sized companies (less than 10 employees) remain least likely to report More new hires.
Layoff Trends
We also asked about layoff trends for the quarter.
Question Asked: And, how would you characterize the number of layoffs of full or part-time payroll employees in your company at this point in 4Q 2012 compared with the same point in the previous quarter (3Q 2012)?
Layoff Trends / Current Survey4Q 2012 / Previous Survey
3Q 2012 / Previous Survey
2Q 2012 / Previous Survey
1Q 2012 / Previous Survey
4Q 2011
More layoffs at this point in 4Q 2012 compared to 3Q 2012 / 12% / 10% / 9% / 7% / 10%
Less layoffs at this point in 4Q 2012 compared to 3Q 2012 / 6% / 6% / 7% / 8% / 7%
Equal amount of layoffs in 4Q 2012 compared to 3Q 2012 / 12% / 13% / 13% / 13% / 12%
No layoffs at this point in either 4Q 2012 or 3Q 2012 / 65% / 63% / 64% / 64% / 63%
Don’t Know / No Answer / 6% / 7% / 8% / 8% / 8%
A total of 12% say there are More layoffs at this point in 4Q 2012 vs. 3Q 2012, up 2-pts from previously. At the same time, 6% say Less layoffs – unchanged.