--Retransmitting Story Initially Sent 18:30 EDT Tuesday
By Steven K. Beckner
Market News International - Dallas Federal Reserve Bank research director and National Association for Business Economics President Harvey Rosenblum said Tuesday an October survey of NABE members shows "the weakest economic performance and outlook" in 22 years.
Rosenblum said the survey results demonstrate there is "extensive room for further government policy stimulus."
NABE, announcing the results of a survey of 126 of its business members, said "underlying demand at NABE panel firms turned negative in the third quarter, for the first time since the 1990-1991 recession." It said demand fell for every industry sector except consulting and other services.
Prior to the Sept. 11 terrorist attacks, firms said sales had been improving, but afterwards nearly two-thirds lowered their sales targets. were down. More firms reported declines in sales, profits, employment and business investment than reported increases. Rosenblum said the findings "depict just about the weakest economic performance and outlook in the 20-year history of the survey." "It clearly shows the negative impact of the September 11 attack, as economic activity had, on balance, been showing signs of improvement prior to the attack," said Rosenblum. ""The only good news in the survey was the near absence of inflationary pressures, indicating, as voiced in NABE's recent policy survey, extensive room for further government policy stimulus."
The group reported the following highlights of its survey:
* Export demand declined in the third quarter, as well. The Net Rising Index for exporters has fallen by 45 percentage points over the past year.
* Current capital spending fell below that of the last recession. Only 17 percent of NABE firms reported increased capital spending, the lowest percentage in the history of the survey.
* More NABE firms reported falling profit margins than rising margins for the fifth quarter in a row. The squeeze on profits remains the most intense since the 1990 recession.
* Inflation pressures essentially disappeared from the economy. Wage increases recorded their weakest reading in the twenty-year history of the survey as only 17 percent increased wages and 6 percent decreased wages, a Net Rising Index of just 11 percent. More firms reported falling material input costs than rising input costs by a 14 percent margin. Selling price increases weakened and 73 percent reported no shortages, up from 62 percent last quarter.
* Employment declined, with 14 percent more firms decreasing employment than increasing. "Future" hiring plans suggest the employment situation will weaken further as 32 percent of respondents expect further decreases in the next six months versus 10 percent expecting increases.
* Economic outlook: In a dramatic shift in the outlook, 90 percent of NABE industry panelists revised their forecasts for the second half of 2001 downward. Last quarter, only 2 percent expected real GDP growth to be negative in the second half of the year. With this survey, 73 percent now expect growth in the last six months of 2001 to be negative.
In response to a question about the impact of the terrorist attacks, 64% of survey respondents said they had lowered sales expectations for their own firms, while only 9% raised them. "Prior to the attack, business had been improving at more firms than deteriorating by a 37 percent to 27 percent margin," said NABE, but "after the attack, only 20 percent of NABE respondents expect business to improve in the remainder of 2001, while 46 percent expect business to deteriorate." One third of NABE panelists reported that the September 11th attacks would produce at least moderate disruptions or cost increases lasting to the end of 2001. Two thirds reported that disruptions or cost increases for their firms would be "at worst temporary."