“NABE’s July 2011 Industry Survey indicates that the economic landscape is weakening and the recovery is softening,” said Shawn DuBravac, chief economist for the Consumer Electronics Association. “Sales growth remains positive for the majority of firms responding in July, but that majority is now smaller than it was last quarter. While only one respondent expects the economy to shrink in 2011, the expectations for economic growth which are dictating company behavior have been reduced from three months ago. The economic picture continues to be clouded by global uncertainties, including the disasters in Japan. There are, however, some silver linings within the current consensus. Forty-two percent of responding firms reported rising employment, an increase from the 40% reported in April and the sixth consecutive quarter of increases in hiring. Moreover, the share of respondents whose firms increased capital spending over the prior quarter edged up to 41% and expectations for future capital spending improved.”
◦ Sales growth retreated in the second quarter, with 56% of survey respondents reporting higher sales, down from the 63% who reported higher sales last quarter. Both the goods-producing and service sectors reported significant weakness, offsetting stronger sales in the finance, insurance, and real estate and the transportation, utilities, information, and communications sectors.
◦ Expectations for economic growth in 2011 have been scaled back, with 76% of panelists currently forecasting real GDP growth will exceed 2%, down from the 94% who held this view in April. The share of respondents planning for real GDP growth to top 3% fell to 11% from 37% in April.
◦ Global events in the first half of 2011—political turmoil in North Africa and the Middle East and the earthquake in Japan—have led to higher input costs expectations and lower sales and economic growth expectations. Compared to the April survey, the expected impact on input costs from North African and Middle East events has eased, while the expected impact on sales and real GDP growth from Japanese events has worsened.
◦ Profitability declined considerably in the recent quarter, with 29% of respondents indicating rising profitability, down from 45% who held this view in April. In the goods-producing sector, more respondents indicated that profit margins are falling at their firms than those who said they are rising.
◦ Forty-two percent of responding firms reported rising employment, an increase from the 40% reported in April and marking the sixth consecutive quarter of increases in hiring.
◦ The share of respondents whose firms increased capital spending over the prior quarter edged up to 41%, while the share indicating their firms decreased capital spending remained close to its historic low at only 6%. Expectations for future capital spending improved, with positive responses exceeding negative ones by 54% to 5%. Expectations remained positive for future spending both on computers and communications equipment and on structures.
◦ Materials costs continued to rise, whereas selling prices and labor costs did not increase at as many firms as in the last quarter. Current survey results show inflationary pressure easing as fewer survey panelists expect selling prices or primary non-labor input prices to rise in the next three months.