IB100: Greater Madison’s Economic Forecast Analysis: What does it all mean?

IB partnered with Chamberlain Research Consultants (CRC) to poll a pre-selected group of 100 companies. Chamberlain researcher Tony Trout has been a tremendous help in structuring the questionnaire, summarizing the data, putting up a Web site for participants so they can get “live” data, and giving back to IB the summary statistics and commentary. President Sharon Chamberlain has made her staff available to us to provide the business community with new tools, and we thank CRC for its ongoing contributions to this project.

The IB100 group includes cross-industry, business-to-business, and business-to-consumer entities, and a few significant nonprofits. The first polling was done in June. We have commitments from 100 company executives to participate, but those failing to report in a timely manner will not be counted. However, our response rate is high enough to reliably represent the lot.

THIS ENTRY IS DIFFERENT THAN OUR PRINT VERSION because it includes a two-month snapshot as well as observations made about the data by our editor, Joseph Vanden Plas.

IB 100 Raw Data

(Statistical charts and participant comments are available. For the June 2009 results, click here. For July 2009, click here.)

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Summary: What does this all mean?

In July, the slight improvement in the IB100’s view of the national economy came despite a spate of bad economic news and doubts that the Obama administration’s stimulus plan was working. Leading the way was a disappointing jobs report in June, when 467,000 job losses were reported, breaking what looked like a pattern of gradual decline in job losses.

As the month progressed, however, the economic news has been more encouraging, including a lower than expected 1% contraction in the second quarter and slightly higher consumer spending (despite another decline in the Conference Board’s Consumer Confidence Index). Upward movement in consumer spending is encouraging because it represents about two-thirds of U.S. economic activity. These numbers also are reflected in higher ratings for the Dane County economy and a higher “excellent” rating for the IB100’s personal economy.

What’s more, while the shedding of 247,000 jobs in July is hardly cause to pop champagne corks, it represents the smallest monthly job loss since August of 2008, and it gets us close to turning the corner.

That growing sense of consumer optimism is not reflected in business expectations for the next 90 days. Executives tended to be more pessimistic regarding growth in company revenues and businesses expenditures, and had lower expectations for charitable giving. They tend to be holding steady on staff levels — fewer anticipate increasing and fewer expect to decrease staff — a lagging indicator when it comes to assessing whether the economy has turned a corner.

In short, while there is some uptick in consumer optimism, businesses will require more proof that a sustainable recovery has taken root.

Business expectations won’t remain down for long if factory orders continue to rise. They grew 0.4% in June, the fourth increase in five months. Although orders for durable goods such as appliances and aircraft declined by 2.2%, the overall increase was driven by a 2.7% rise in orders for nondurable goods such as chemicals and textiles, and a 13.2% rise in orders for petroleum and coal products. Manufacturers’ orders for nondefense capital goods are one of 10 leading economic indicators (LEIs) of business strength identified by The Conference Board.