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Business Economists See More Signs of Recession

New survey tracks declining demand for goods and services

By Mark Huffman
ConsumerAffairs.com

November 3, 2008

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The nation's business economists are growing more pessimistic about the outlook for the U.S. economy, noting there are more signs the country is now in the midst of a recession.

In the latest survey by NABE, the National Association for Business Economics, there were more respondents reporting a decline in demand for goods and services than said there was an increase. Weakness was especially pronounced in the goods-producing sector, where only six percent of firms reported increased demand while 61 percent reported declining demand.

It's the first time that's happened since 2001 and is consistent with other evidence that the U.S. economy fell into a recession in the third quarter. In fact, every time since 1982 that this indicator has turned negative, the economy has later proved to be in a recession.

"Respondents to the October NABE Industry Survey were considerably more negative than they were in July, suggesting that the ongoing financial crisis is pulling down the overall economy," said Ken Simonson, Chief Economist, Associated General Contractors of America.

Looking ahead to 2009, 90 percent of survey panelists said their forecast for 2009 U.S. output growth became more pessimistic between July and October. Falling profit margins outnumbered rising margins 3-1 last quarter among respondents' firms -- the worst reading since 1982. For the first time since 2003, more panelists' firms cut jobs than added them, and the employment outlook for the next six months is even more negative.

Those responding to the October survey were significantly more pessimistic about the macroeconomic outlook than they were in the July survey. A full 38 percent expect U.S. real GDP to be lower in 2009 than in 2008, and 79 percent expect growth of less than one percent. Only one respondent expects growth of more than three percent in 2009.

Ninety percent of survey panelists said their forecast for 2009 became more pessimistic between July and October, compared to only two percent who said they became more optimistic. Thirty-eight percent became significantly more pessimistic, reflecting the deterioration in financial markets that occurred in September and October.

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