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22nd Annual Corporate Survey

Area Development Magazine Special Presentation (Dec/Jan 08)

Figure 18, plans for new facilities are down. Only 20 percent of the 2007 survey respondents expect to open new facilities within one year, as compared to 25 percent of the 2006 survey respondents who had expected to do so, and 24 percent of the 2005 respondents with one-year new facility plans.

It’s a case of déjà vu. In last year’s survey, I wrote about how our readers’ plans reflected moderating growth of the U.S. economy brought about by a softening in the housing market and rising energy prices…about the Federal Reserve Bank lowering interest rates to boost borrowers’ confidence.
Fast forward to December 2007 and the situation has gone from bad to worse. Many economists are saying the nation is on the brink of a recession, yet the latest Commerce Department reports indicate that U.S. GDP grew 4.9 percent in the third quarter of this year thanks to an acceleration in exports. This is the strongest performance in four years. And while rising energy prices might lead to a rise in inflation, the Federal Reserve noted in early November that core inflation had improved.

Even business leaders’ predictions for the economy are at odds. Executives at heavy-equipment maker Caterpillar say the United States might fall into recession in 2008, but their peers at Intel, Ford, and Dupont disagree. The latter group believes falling housing prices and the crisis in the subprime mortgage market are not enough to put the U.S. economy into recession. In fact, a Business Council survey of chief executive officers conducted in late October predicted that growth would slump to 2 percent or less next year but there would be no recession.

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Additionally, only 63 percent of large and 76 percent of small manufacturing companies responding to a National Association of Manufacturers (NAM) third-quarter survey had a positive business outlook, representing the lowest level of optimism in roughly four years. Nevertheless, both groups of manufacturers expect pricing to remain stable and sales to increase, albeit moderately, over the next year. They also expect to continue to increase capital expenditures, although there will be a significant slowdown. Large manufacturers’ capital expenditures are projected to rise by only 0.3 percent, while small manufacturers’ capital expenditures are expected to increase by 1.6 percent. Both groups of respondents to the NAM survey also expect to increase employment over the next 12 months, with employment increases at large firms being more modest (just 0.4 percent) than at smaller companies (1.6 percent).

How do all these findings and predictions compare to our readers’ plans? Once again Area Development’s editors have surveyed our readers to determine their plans and priorities for the next several years. The results of our 22nd Annual Corporate Survey follow.

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