U.S. Economy in Accelerated Freefall: ChangeWave Survey Reveals

By: Daniel Chubb | December 8, 2008

The latest ChangeWave corporate quarterly survey, completed December 1st, shows the U.S. economy is caught in the clutches of a recession far deeper and more painful than the recession of 2001.

The survey of 3,029 U.S. respondents found alarmingly low 4th quarter sales projections, abysmal visibility going forward, a deteriorating job market, and an unprecedented pullback in capital spending.

More than half of respondents (51%) project that their company sales will come in Below Plan for the 4th Quarter 2008 – 16-pts worse than the previous quarter. Only 11% say their company sales will come in Above Plan – a 7-pt 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.

The survey also shows an unprecedented deterioration in the labor market. Nearly one-third (31%) of respondents say there are Less new hires in their company at this point in the 4th Quarter vs. last quarter – a 9-pt increase since the previous survey. Only 8% say there are More new hires.

Credit Crisis Tightens its Chokehold – Over the past year, ChangeWave has measured the impact of the credit crisis on U.S. businesses. Yet despite the federal government’s numerous attempts to open the credit spigot, the latest data shows the U.S. credit crunch is continuing to worsen.

Three-in-ten respondents (30%) now say that it is harder for their company to borrow money than it was just 90 days ago – a 5-pt jump from the previous survey. Less than 1% say it is easier to borrow money.

Any 1st Quarter Relief? – Adding to these grim findings, the current survey shows a huge plunge in visibility going forward. Sales pipeline projections for the 1st Quarter show 39% of respondents reporting they’ll come in Below Plan, 18-pts worse than the previous survey. Just 9% say their company will come in Above Plan – 12-pts less than previously. These are by far the lowest sales pipeline numbers in a ChangeWave survey.

But in perhaps the most ominous sign of rapidly deteriorating U.S. business conditions, respondents also project the largest cutbacks in capital spending in a ChangeWave survey since the question was first asked back in December 2002.

Nearly half of respondents (45%) project a decrease in their company’s 1st Quarter capital budget compared to the current quarter. Only 6% project an increase.

Most disturbingly, capital spending is plunging at a time of year when we normally experience 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.

Ever since 2003, December has always been the peak point of the yearly cycle in this survey – up until December of 2007. That’s when there was a critical early warning that cap spending was seriously breaking down. Continued deterioration for the next four quarters has led to this December’s historic collapse.

For additional findings and charts on our Corporate Quarterly Survey results, visit changewave.com.

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