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Everyone knows it's a jungle out there for the U.S. economy, but how does this recession compare with the last one?
The U.S. economy is caught in the clutches of a recession far deeper and more painful than anything seen in the 2001 recession, according to ChangeWave's latest corporate survey, which was conducted Nov. 20 through Dec. 1.
The ChangeWave survey of 3,029 U.S. respondents found alarmingly low fourth-quarter sales projections, abysmal visibility, a deteriorating job market and an unprecedented pullback in capital spending. And that's just for starters.
Here's a snapshot of our results:
Fourth-Quarter Economic Freefall
A whopping 51% of respondents projected that their company sales will come in below plan for fourth quarter 2008 -- 16 points worse than the previous quarter. Only 11% said their company sales will come in above plan -- a seven-point decrease from previously.
As the following chart shows, these corporate sales projections are the worst ever recorded in a ChangeWave survey dating back to the depths of the 2001 recession.
But there's more.
The survey also shows an unprecedented deterioration in the labor market. Thirty-one percent of respondents said they have fewer new hires in their company at this point in the fourth quarter versus the last quarter -- a nine-point increase since the previous survey. Only 8% said they have more new hires.
Credit Crisis Tightens Its Chokehold
So far we've been looking at symptoms of this accelerating recession. Now let's turn to one of the key causes.
During the past year, we've been measuring the impact of the credit crisis on U.S. businesses. And despite the federal government's numerous attempts to open the credit spigot, our latest data show the U.S. credit crunch continues to worsen.
Thirty percent of respondents said it is harder for their company to borrow money than it was just 90 days ago -- a five-point jump from the previous survey. Less than 1% said it's easier to borrow money.
No Relief Coming in the First Quarter
On top of everything, the current ChangeWave survey shows a huge plunge in visibility for Q1 2009.
Our sales pipeline projections data for Q1 show that 39% of respondents reported they'll come in below plan -- 18 points worse than previously. Just 9% said their company will come in above plan -- 12 points less than previously.
These are by far the lowest sales pipeline numbers we've ever recorded in a ChangeWave survey.
In perhaps the most ominous sign of the rapid deterioration in U.S. business conditions, respondents also projected the largest cutbacks in capital spending we've recorded since we began asking this question in December 2002.
An eye-popping 45% projected a decrease in their company's first-quarter capital budget compared with the current quarter. Only 6% projected an increase.
Most disturbingly, capital spending is plunging at a time of year when we normally see seasonal increases. This becomes immediately apparent when you look at the change for each December, beginning with December 2003, in the capital budgets chart above.
Since 2003, December has always been the peak point of the yearly cycle in this survey -- up until December 2007, that is. That's when we had a critical early warning that capital spending was seriously breaking down.
Continued deterioration for the next four quarters has led us to this December's historic collapse.
Bottom Line
The current ChangeWave survey results provide clear evidence that the U.S. recession has now entered an unprecedented and rapidly accelerating freefall -- with no relief yet in sight.
Moreover, the U.S. credit crunch is weighing more heavily on U.S. businesses now than at any point in the past year.
Investors beware: A retesting of the November stock market low looks like a virtual guarantee with survey results like these.
Paul Carton is the Director of Research for the ChangeWave Alliance Research Network. Jean Crumrine is an Associate Director of Research. The Research Network is a group of 20,000 highly qualified business, technology and medical professionals -- as well as early adopter consumers -- who work in leading companies of select industries. ChangeWave surveys its network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.
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