viii - changewave · web view2012/09/17 · i. key findings introduction: changewave’s latest...

ChangeWave Research: 3Q/4Q 2012 Corporate Quarterly Survey

ChangeWave Research Report:3Q/4Q 2012 Corporate Quarterly SurveyFiscal Cliff Mutes U.S. Business Recovery – Economy Still Stuck in Slow Lane

Paul Carton and Jean Crumrine

Overview: ChangeWave’s latest corporate quarterly survey shows the U.S. economy is still stuck in slow growth mode – with softer 3rd Quarter sales, a tight job market, and slower capital spending. ChangeWave Research is a service of 451 Research.

The August 27- September 10 survey of 2,642 corporate respondents points to a continuation of the tightening business environment we saw in last quarter’s survey. Nonetheless, the slowing this quarter isn’t as dramatic as last quarter’s. Nor is it as bad as this same time a year ago. At the sector level, Semiconductors is currently under the most pressure while Healthcare is performing somewhat better than the rest.

The looming Fiscal Cliff is clearly contributing to the current economic softness according to the survey results. But even as U.S. businesses remain cautious, some indicators – including availability of credit and the 4th Quarter sales pipeline – appear to be stabilizing. Slow Growth for the U.S. Economy

3rd Quarter 2012 Sales: Just under one-in-five respondents (19%) say their company sales will come in Above Plan for 3rd Quarter 2012 – which is 1-pt lower than the previous quarter. Another one-in-three (33%) say their company sales will come in Below Plan – 3-pts worse than previously.

Putting The Findings in Context: As the following chart shows, this is the third September in a row we’re seeing a decline in corporate sales growth – but the net 4-pt drop this quarter isn’t as bad as we saw in either September 2011 or September 2010.

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information.It may not be copied or distributed without permission. ©2012 451 Research, LLC. All rights reserved.

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September 17, 2012


Customer Spending: We asked respondents to rate the current willingness of their existing customers to spend money on their company’s products and services. A total of 60% 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) – 4-pts worse than the previous quarter.

Only 33% report their customers have a Green Light to spend (i.e., spending is normal) – 3-pts worse than previously.

Job Market: The survey results show the tight U.S. labor market continues, with only 18% reporting there are More new hires in their company at this point in the 3rd Quarter vs. last quarter –1-pt worse than previously. Another 17% report there are Less new hires – 3-pts worse.

Capital Spending: In a further sign of slower growth, one-in-ten (10%) respondents project an increase in their 4th Quarter capital budgets, while 19% project a decrease – a net 3-pts worse than last quarter.


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Impact of the “Fiscal Cliff”: The "Fiscal Cliff" refers to the choices facing Congress on or before the end of 2012 to either extend or cancel hundreds of billions of dollars of scheduled tax increases and spending cuts. The lack of a resolution to date has led to growing uncertainty among some economists and business leaders, who fear the issue could end up stalling the economic recovery.

ChangeWave’s August Business IT Spending survey found the looming U.S. Fiscal Cliff issue is already having significant negative consequences for corporate IT spending plans. But what effect is it having on overall corporate capital budgets?

After briefly defining the term Fiscal Cliff, we asked U.S. corporate respondents whether the Fiscal Cliff issue was causing any adjustments to be made to their overall 4th Quarter capital budgets.

Thinking about your company's overall Capital Budget for 4th Quarter (Oct-Dec) 2012, 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 4th Quarter vs. the current quarter?

Current SurveySep ‘12

Decrease in 4th Quarter Capital Budget Because of "Fiscal Cliff" Issue and Associated Uncertainty

25%

Increase in 4th Quarter Capital Budget Because of "Fiscal Cliff" Issue and Associated Uncertainty

3%

No Impact on 4th Quarter Capital Budget 52%Don't Know 20%

One-in-four U.S. corporate respondents (25%) say the Fiscal Cliff issue is causing their company to Decrease its 4th Quarter capital budget, leaving little doubt the issue is exacting a serious toll on U.S. business cap spending going forward. Similar to the Congressional debt reduction controversy last summer, the Fiscal Cliff is acting as a drag on the U.S. economic recovery.

Other findings, however, do show signs of a stabilizing U.S. economy.


3


Longer Term Cap Spending Outlook: Looking further ahead at cap spending projections for first half 2013, 17% think their capital spending will be Greater Than 2nd half 2012 and 22% Less Than 2nd half 2012 – but that remains essentially unchanged from the previous survey.

4th Quarter 2012 Sales Pipeline: Sales pipeline projections for 4th Quarter also look relatively stable, with 21% saying their company sales will come in Above Plan – unchanged from previously – and 22% Below Plan, 2-pts worse.

Availability of Credit: In another sign of stabilization, the availability of credit for U.S. businesses remains unchanged this quarter and is at one of its best levels since the credit crisis began.

A total of 7% of respondents say it is easier for their company to borrow money than it was 90 days ago – similar to previously. And while 12% continue to say it’s harder to borrow money – that’s also unchanged.

* Note: 56% of respondents report there has been No Change in their company’s ability to borrow money.


4


Other Economic Indicators

Price Pressures: Last quarter’s survey showed signs of downward pressures on the prices companies are charging for their products.

This quarter we’re seeing a slight change, with 16% now reporting prices are Rising for their company’s products, up 1-pt from last quarter. At the same time, the percentage reporting Falling prices is down 1-pt to 15%.

*Note that a total of 61% report their company’s prices are holding firm in the marketplace.

We asked respondents who reported prices are rising for their company’s products to tell us the most important reasons why.

Higher Commodity Costs (42%) is up 4-pts as the number one reason. Higher Energy Costs (32%; up 4-pts) ranks second, followed by General Inflation (31%; down 7-pts).

Ability of Companies to Purchase Commodities: After improving last quarter, we’re seeing a slight tightening in the ability of companies to purchase commodities. A total of 17% now say it is harder for their company to purchase commodities than it was 90 days ago, and only 7% say it’s easier – a net 6-pt change from previously.


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Bottom Line: This latest ChangeWave survey shows the U.S. economy remains stuck in slow growth mode – with softer 3rd Quarter sales, a tight job market, and slower capital spending. At the sector level, Semiconductors is currently under the most pressure while Healthcare is performing somewhat better than the rest. In a follow-up ChangeWave report we’ll provide full details on these and other sectors.

The looming Fiscal Cliff is clearly contributing to the current economic softness according to the survey results. Yet even as U.S. businesses remain cautious, some indicators – including availability of credit and the 4th Quarter sales pipeline – appear to be stabilizing.

Despite the lack of U.S. business momentum this quarter, the consumer economy did show a surprising uptick in our August survey and the back to school shopping season appears to be one of the more robust in years. It remains to be seen if consumer spending will continue to outperform this fall. Our September consumer spending survey report will be released mid-month and it will provide fresh insight on the consumer outlook.

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.


U.S. Economy Stuck in the Slow Lane Softer 3rd Quarter Sales Only 19% of respondents

say their 3rd Quarter sales will come in Above Plan – 1-pt lower than the previous quarter

33% say their 3Q sales will come in Below Plan – 3-pts worse than previously

Tight U.S. Job Market Continues 18% see more new hires in

their company this quarter – down 1-pt since last quarter

17% see less new hires – which is 3-pts worse

Some IndicatorsShow Signs of a Stabilizing Economy4th Quarter Sales Pipeline 21% project their sales for

the coming 4th Quarter will come in Above Plan – unchanged from previously

22% say they’ll come in Below Plan – 2-pts worse

Availability of Credit for U.S. Businesses 7% say it’s easier for their

company to borrow money than it was 90 days ago – unchanged from previously

And while 12% say it’s harder – that’s also unchanged

“Fiscal Cliff” Hurting Business Recovery One-in-four (25%) say the

Fiscal Cliff Issue is causing their company to Decrease its 4th Quarter capital budget

4Q Capital Spending Only 10% see an increase

in their 4Q cap spending – unchanged from last quarter

But 19% project a decrease in their 4Q capital budgets – 3-pts worse than last quarter

Longer Term Cap Spending Outlook 17% think their 1st half

2013 cap spending will be Greater Than 2nd half 2012; 22% think it will be Less Than – essentially unchanged from previously

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Table of ContentsSummary of Key Findings................................................................................................6Key Findings.......................................................................................................................8

3Q 2012 Sales Results..................................................................................8 Last 11 Years Comparison...........................................................................8

Current Willingness of Customers to Buy Products................................................9Hiring Trends in the 3rd Quarter...........................................................................10

3Q 2012 Hiring Trends – A Comparison...................................................10 Hiring Trends By Company Size...............................................................11

Layoff Trends in the 3rd Quarter...........................................................................11 3Q 2012 Layoff Trends – A Comparison..................................................11

Capital Spending Growth Rate..............................................................................12 Overall 4Q Capital Budgets – A Comparison............................................12 Impact of the Fiscal Cliff Issue..................................................................12 Looking Ahead – Overall Capital Budgets Next Half...............................13

What’s in the Pipeline?..........................................................................................14 Overall Sales Pipeline Projections – A Comparison..................................14 Last 11 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.......................................17 Companies Offering Discounts on Products/Services...............................17

Additional Findings and Highlights...............................................................................18 3rd Quarter Cancelled Orders................................................................................18

Product Inventories for the 3rd Quarter.................................................................19Backlog of Orders for the 3rd Quarter...................................................................20

ChangeWave Research Methodology............................................................................21About ChangeWave Research........................................................................................21About 451 Research.........................................................................................................21


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I. Key Findings Introduction: ChangeWave’s latest corporate quarterly survey shows the U.S. economy is still stuck in slow growth mode – with softer 3rd Quarter sales, a tight job market, and slower capital spending. ChangeWave Research is a service of 451 Research.

The August 27- September 10 survey of 2,642 corporate respondents points to a continuation of the tightening business environment we saw in last quarter’s survey. Nonetheless, the slowing this quarter isn’t as dramatic as last quarter’s. Nor is it as bad as this same time a year ago. At the sector level, Semiconductors is currently under the most pressure while Healthcare is performing somewhat better than the rest.

The looming Fiscal Cliff is clearly contributing to the current economic softness according to the survey results. But even as U.S. businesses remain cautious, some indicators – including availability of credit and the 4th Quarter sales pipeline – appear to be stabilizing.

Slow Growth for the U.S. Economy

3rd Quarter 2012 Sales: Just under one-in-five respondents (19%) say their company sales will come in Above Plan for 3rd Quarter 2012 – which is 1-pt lower than the previous quarter. Another one-in-three (33%) say their company sales will come in Below Plan – 3-pts worse than previously.

Putting The Findings in Context: As the following chart shows, this is the third September in a row we’re seeing a decline in corporate sales growth – but the net 4-pt drop this quarter isn’t as bad as we saw in either September 2011 or September 2010.


8


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 60% 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) – 4-pts worse than the previous quarter.

Only 33% report their customers have a Green Light to spend (i.e., spending is normal) – 3-pts worse than previously.


9



10


Hiring Trends We also asked respondents about hiring trends in their company for the quarter.

Question Asked: We are two-thirds through 3rd Quarter 2012. How would you characterize the number of new hires (full or part-time payroll employees) in your company at this point in 3Q 2012 compared with the same point in the previous quarter (2Q 2012)?

Hiring TrendsCurrent Survey

3Q 2012

Previous Survey

2Q 2012

Previous Survey

1Q 2012

Previous Survey

4Q 2011

Previous Survey

3Q 2011More new hires at this point in 3Q 2012 compared to 2Q 2012

18% 19% 18% 16% 17%

Less new hires at this point in 3Q 2012 compared to 2Q 2012

17% 14% 13% 16% 17%

Equal amount of new hires in 3Q 2012 compared to 2Q 2012

21% 21% 20% 21% 22%

No new hires at this point in either 3Q 2012 or 2Q 2012

38% 39% 40% 40% 37%

Don’t Know / No Answer 6% 7% 8% 7% 7%

Job Market: The survey results show the tight U.S. labor market continues, with only 18% reporting there are More new hires in their company at this point in the 3rd Quarter vs. last quarter –1-pt worse than previously. Another 17% report there are Less new hires – 3-pts worse.

Hiring among medium-sized to larger companies has shown a decline since the previous survey – though we note respondents in the smallest-sized companies (less than 10 employees) are still far less likely to report More new hires.


11


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 3Q 2012 compared with the same point in the previous quarter (2Q 2012)?

Layoff TrendsCurrent Survey

3Q 2012

Previous Survey

2Q 2012

Previous Survey

1Q 2012

Previous Survey

4Q 2011

Previous Survey

3Q 2011More layoffs at this point in 3Q 2012 compared to 2Q 2012

10% 9% 7% 10% 10%

Less layoffs at this point in 3Q 2012 compared to 2Q 2012

6% 7% 8% 7% 7%

Equal amount of layoffs in 3Q 2012 compared to 2Q 2012

13% 13% 13% 12% 13%

No layoffs at this point in either 3Q 2012 or 2Q 2012

63% 64% 64% 63% 63%

Don’t Know / No Answer 7% 8% 8% 8% 7%

A total of 10% say there are More layoffs at this point in 3Q 2012 vs. 2Q 2012, up 1-pt from previously. At the same time, 6% say Less layoffs – 1-pt worse.


12


Capital Spending Growth Rate

Capital Spending: In a further sign of slower growth, one-in-ten (10%) respondents project an increase in their 4th Quarter capital budgets, while 19% project a decrease – a net 3-pts worse than last quarter.

Impact of the “Fiscal Cliff” Issue

The "Fiscal Cliff" refers to the choices facing Congress on or before the end of 2012 to either extend or cancel hundreds of billions of dollars of scheduled tax increases and spending cuts. The lack of a resolution to date has led to growing uncertainty among some economists and business leaders, who fear the issue could end up stalling the economic recovery.

ChangeWave’s August Business IT Spending survey found the looming U.S. Fiscal Cliff issue is already having significant negative consequences for corporate IT spending plans. But what effect is it having on overall corporate capital budgets?

After briefly defining the term Fiscal Cliff, we asked U.S. corporate respondents whether the Fiscal Cliff issue was causing any adjustments to be made to their overall 4th Quarter capital budgets.

Thinking about your company's overall Capital Budget for 4th Quarter (Oct-Dec) 2012, 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 4th Quarter vs. the current quarter?

Current SurveySep ‘12

Decrease in 4th Quarter Capital Budget Because of "Fiscal Cliff" Issue and Associated Uncertainty

25%

Increase in 4th Quarter Capital Budget Because of "Fiscal Cliff" Issue and Associated Uncertainty

3%

No Impact on 4th Quarter Capital Budget 52%Don't Know 20%


13


One-in-four U.S. corporate respondents (25%) say the Fiscal Cliff issue is causing their company to Decrease its 4th Quarter capital budget, leaving little doubt the issue is exacting a serious toll on U.S. business cap spending going forward. Similar to the Congressional debt reduction controversy last summer, the Fiscal Cliff is acting as a drag on the U.S. economic recovery.

Other findings, however, do show signs of a stabilizing U.S. economy.

Longer Term Cap Spending Outlook: Looking further ahead at cap spending projections for first half 2013, 17% think their capital spending will be Greater Than 2nd half 2012 and 22% Less Than 2nd half 2012 – but that remains essentially unchanged from the previous survey.


14


What's in the Pipeline for 4th Quarter 2012?

4th Quarter 2012 Sales Pipeline: Sales pipeline projections for 4th Quarter also look relatively stable, with 21% saying their company sales will come in Above Plan – unchanged from previously – and 22% Below Plan, 2-pts worse.

Here’s a look at the projected pipeline results from 2001 to the present:


15


Availability of Credit

In another sign of stabilization, the availability of credit for U.S. businesses remains unchanged this quarter and is at one of its best levels since the credit crisis began.

Question Asked: Would you say it is now harder for your company to borrow money than it was 90 days ago, easier to borrow money, or has there been no change in your company's ability to borrow money?

* Note: 56% of respondents report there has been No Change in their company’s ability to borrow money.

A total of 7% of respondents say it is easier for their company to borrow money than it was 90 days ago – similar to previously. And while 12% continue to say it’s harder to borrow money – that’s also unchanged.


16


The Price of Products

Price Pressures: Last quarter’s survey showed signs of downward pressures on the prices companies are charging for their products.

This quarter we’re seeing a slight change, with 16% now reporting prices are Rising for their company’s products, up 1-pt from last quarter. At the same time, the percentage reporting Falling prices is down 1-pt to 15%.

*Note that a total of 61% report their company’s prices are holding firm in the marketplace.

We asked respondents who reported prices are rising for their company’s products to tell us the most important reasons why.

Higher Commodity Costs (42%) is up 4-pts as the number one reason. Higher Energy Costs (32%; up 4-pts) ranks second, followed by General Inflation (31%; down 7-pts).


17


Ability of Companies to Purchase Commodities: After improving last quarter, we’re seeing a slight tightening in the ability of companies to purchase commodities. A total of 17% now say it is harder for their company to purchase commodities than it was 90 days ago, and only 7% say it’s easier – a net 6-pt change from previously.

Company Discounts: For the second quarter in a row, discounts are becoming more prevalent.

Question Asked: Is your company offering more discounts than they did 90 days ago, fewer discounts, or has your company's discounting remained the same?

A total of 15% report their company is offering More Discounts than they did 90 days ago and 7% say Fewer Discounts – a net 3-pt change from the previous survey.


18


II. Additional Findings and Highlights

3rd Quarter Cancelled Orders

A total of 15% report their company is experiencing an increase in cancelled orders, 3-pts higher than the previous survey.

At the same time, only 4% report their companies are experiencing a decrease in cancelled orders –unchanged from previously.


19


3rd Quarter Product Inventories

Inventories: We also asked respondents to describe their product inventories for the current quarter.

A total of 12% report their product inventories decreased in the 3rd Quarter, and 10% say they’ve increased – essentially the same as previously.


20


Backlog of Orders for the 3rd Quarter

Order Backlog: We asked respondents if they have noticed any change in their backlog of orders for the current quarter. Only 14% report an increase in their Order Backlog during the 3rd Quarter, 3-pts less than last survey. Another 24% report a decrease in Order Backlogs, 3-pts more than previously.


21


ChangeWave Research Methodology

This report is based on a survey of ChangeWave Alliance members conducted online between August 27 – September 10, 2012. The goal of the survey was to get an up-to-date picture of the health of the U.S. Economy and its sectors, including any changes during the 3rd Quarter of 2012. A total of 2,642 accredited U.S. Alliance members participated in the survey.

ChangeWave's proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members of its research network.

The business and investment intelligence provided by ChangeWave provides a real-time view of companies, technologies, and consumer and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

About ChangeWave ResearchChangeWave Research, a service of 451 Research, is a survey research firm that identifies and quantifies change in corporate buying & business trends, telecom trends, and consumer spending & electronics trends.

The ChangeWave Research Network is a group of 25,000 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. ChangeWave delivers its products and services on the Web at www.ChangeWaveResearch.com.

451 Research, LLC, including its ChangeWave Research service, does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

About 451 Research451 Research, a division of The 451 Group, is a leading global analyst and data company focused on the business of enterprise IT innovation. Clients of 451 Research – at end-user, service-provider, vendor, and investor organizations – rely on 451 Research’s insight through a range of syndicated research and advisory services to support both strategic and tactical decision-making. For additional information on 451 Research, go to: 451research.com.

For More Information:ChangeWave Research Telephone: 301-250-23637101 Wisconsin Ave. Fax: 240-200-3988Suite 1301 www.ChangeWaveResearch.comBethesda, MD 20814 [email protected]


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viii - changewave · web view2012/09/17 · i. key findings introduction: changewave’s latest...

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