Statistics Reveal Truth
By Kevin F. Clune, CLP
What leading indicators do you monitor for your business? Do those indicators support the trends you are seeing in your particular industry? What conclusions can be drawn?
While the answers will vary from one industry to the next, the Economic Cycle Research Institute (ECRI) and the National Federation of Independent Business (NFIB) have both issued recent reports that caught my eye, and may have universal application. The prospect of poring over statistics can be daunting but these particular studies are concise, insightful, and worth your attention.
1. The weekly August 3, 2012 ECRI report measures the Big Four Leading Indicators: Industrial Production, Real Income, Employment, and Real Retail Sales. June 2009 data is used as the baseline for the purposes of this report. As of July 27, 2012, all of these indicators edged up a bit with one exception, Real Retail Sales, which showed a contraction.
2. The NFIB July 2012 Survey Report mirrors the ECRI data, also indicating depressed investment in capital equipment. This report is based upon the responses of 740 randomly sampled small businesses in NFIB’s membership, who were surveyed throughout the month of June 2012. In a nutshell, reports of capital expenditures declined, spending on improvements and /or expansion of facilities was lower, and the percent of owners planning capital outlays in the next 3 to 6 months was also down.
There is another key statistic that was recently brought to my attention by a business associate that also supports our belief that businesses are reluctant to replace old equipment. The nugget of information to which I am referring is: “The average age of cars on the road in the United States is an all time high of 11 years” as reported in a June 29th Chicago Tribune article. This information is compelling because the average age of US cars on the road has hovered between 6 & 7 years for decades.
Now for the good news: Increased sales of capital equipment – and vehicles – could be on the horizon.
I know I have said it before in this very column that there is pent up demand, as business owners are only purchasing essential equipment (and vehicles). One can conclude that this recent evidence of the two business reports that are cited above and also the car age statistic indicates that the situation still exists.
Since my business is in the capital equipment finance industry, it is only natural that I am particularly interested and focused on the state of the economy as related to capital equipment sales. These reports make the case that there is a huge amount of pent up demand in the capital equipment sector. Fortunately, both of the business reports do support what we are experiencing in our business and what I am hearing in speaking to customers.
If these economic indicators were actually showing a recovery but business activity was still in a slump, the contradiction would be disconcerting. Facts can reveal the truth of a situation and it is heartening when they also affirm personal experience.
We now need a report that will indicate WHEN the dam will give way and demand will return.
Kevin F. Clune, CLP
Clune & Company, LC
