3Q/4Q 2015 Business Trends Report: Growth Slows for U.S. Economy

3Q/4Q 2015 Business Trends Survey Report

Growth Slows for U.S. Economy –


Global Economic Conditions Taking a Toll

Overview:
451 Research’s latest ChangeWave business trends survey shows a slowdown in growth for the U.S. economy – led by lower 3rd Quarter
sales projections, a softer jobs market, and sluggish capital spending.

The August 20 – September 9 survey of 2,215 corporate respondents also shows a downturn in 4Q sales pipeline projections, with global
economic conditions clearly having an impact on U.S. businesses. ChangeWave Research is a service of 451 Research.

Slowdown in Growth for the U.S. Economy

3rd Quarter 2015 Sales.
A total of 21% of respondents said their company sales would come in Above Plan for 3rd Quarter 2015 – which is 1-pt lower
than the previous survey. Another 29% said their company sales would come in Below Plan – 2-pts worse than previously.

Putting the Findings in Context.
As the following chart shows, corporate sales growth was down in the latest survey – the first measurable downtick in nearly three
years. Though sales growth is below ChangeWave’s findings from a year ago, this is still the second best September reading since 2007.

Customer Spending.
The survey asked respondents to rate the current willingness of their existing customers to spend money on their company’s products and
services. A total of 44% report their customers have a Green Light to spend (i.e., spending is normal) – down 4-pts from
previously.

Another 48% 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) – 3-pts worse.

Job Market.
For the first time in three quarters the survey shows slower growth in the U.S. labor market. Only 18% report there were More
new hires in their company in the 3rd Quarter vs. 2nd Quarter – down 2-pts from previously. Another 13% say Less new hires –
also 2-pts worse.

Seasonal factors account for some of this softness. Since 2010, all but one of ChangeWave’s September surveys have registered a
downtick in hiring.

Note that small- to mid-sized companies are much more likely to report slower hiring growth.

4th Quarter 2015 Sales Pipeline.
Sales pipeline projections for 4th Quarter remain strong but are also tightening – with 22% saying their company sales will come in Above Plan and 17% Below Plan – down a net 4-pts from previously and 2-pts worse than a year ago.

Impact of the Global Economy

Respondents were also asked whether the current state of the global economy is causing their company to make any adjustments to 4th
Quarter sales projections.

Nearly one-in-five (19%) report the current state of the global economy is causing their company to Decrease 4th Quarter sales
projections, while just 6% say it’s causing them to Increase sales projections. Clearly, global economic conditions are a key
contributing factor for reduced 4Q sales visibility.

To put this in perspective, when a similar question on global tensions and uncertainty was asked a year ago, just 7% said they were
likely to Decrease sales projections because of global conflicts and associated uncertainty.

Thinking about your company’s Sales Pipeline for the 4th Quarter (Oct-Dec) 2015, is the current state of the global economy
causing your company to increase its Sales Pipeline projections, decrease Sales projections, or is it having no impact on your
Sales projections for the 4th Quarter?

Capital Spending.
In a further sign of slower growth, just 11% of respondents project an Increase in their 4th Quarter capital budgets, while
17% say Decrease – a net 4-pts worse than previously.

Availability of Credit.
The survey also shows signs of tightening in the availability of credit for U.S. businesses compared to the previous quarter. A total
of 8% say it’s Easier for their company to borrow money now than it was 90 days ago, but another 8% also say it’s Harder – a net 3-pts worse than previously.

Price Pressures.
There’s continued downward pressure on the prices companies are charging for their products. Just 10% report prices are Rising
for their company’s products, down 2-pts from last quarter. At the same time, 18% are reporting Falling prices – up 3-pts.

Importantly, downward price pressures represent a double-edged sword – while good news for consumers, lower prices often result in
declining business margins as well.

Ability of Companies to Purchase Commodities.
After a tightening last quarter, the survey now shows a big improvement in the ability of companies to purchase commodities. A total of
17% report it’s Easier for their company to purchase commodities than it was 90 days ago, and just 6% say it’s Harder
– a net 9-pt improvement from previously.

Bottom Line:
451 Research’s latest ChangeWave business trends survey shows a slowdown in U.S. economic growth – with lower 3rd Quarter sales, a
softer jobs market, and weakness in 4Q capital spending.

There are signs of tightening in the 4th Quarter sales pipeline as well.

These results show the current state of the global economy is exacting a toll on U.S. business growth, with nearly one-in-five
respondents saying it’s causing their company to decrease 4Q sales projections. The findings are consistent with ChangeWave’s consumer
survey results, which have also shown spending being impacted by global economic conditions.

At the same time, the slowdown in growth is resulting in downward price pressures. And though this may be welcome news for consumers,
lower price pressures could eventually lead to declining business margins.

Summary of Key Findings

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