Local businesses have spent more in the last 6 months and are planning to spend even more in the next 6 months, than at any time since 2007.
The Kamran Afshar- Greater Lehigh Valley Chamber of Commerce survey of Lehigh Valley businesses is done on a quarterly basis and collects about a thousand observations per year. The Employment and Purchasing Index for the Lehigh Valley highlights the results of these surveys.
In July 2015 we conducted our 63rd survey of this series which recorded continued optimism in the local economy.
Business sentiment, as measured by the overall index dropped slightly to 61.1 in July, and is just slightly above its July 2014 level. It should be noted that the highest level for the index (68.5) was reached in April 2006. Subsequently the index fell to 44.4, its lowest point, in April 2009. The overall index’s trend has been sideways since Last July and despite that it is higher than any time since 2007.
The index of past purchases and plans for future purchases has been running in the range which is historically associated with expansion. Which means local businesses have spent more in the last 6 months and are planning to spend even more in the next 6 months, than any time since 2007.
The largest gain in the last 12 months continues to be in the index of purchases during the last next 6 months. This index is 6.4% above its July 2014 level and also in the expansionary range. And it now trends higher than anytime since the recession.
Local business’ planned expenditures did not change significantly from its April level, and is slightly higher than its July 2014 level. This index has been in the expansionary range since last October, a very positive sign for the local economy. While 40.4% of the local businesses are planning to increase their expenditures over the next 6 months, only 7.7% are planning to reduce theirs.
Local businesses have spent more in the last 6 months and are planning to spend even more in the next 6 months, than any time since 2007.
One of the indices which recorded a measurable decline is the index of hiring over the last 6 month. This indicator dropped to 54.3 in July, a drop of 4.8% since April 2015. This index has been oscillating up and down within a 5% range since January of 2014.
Twenty-one percent of the respondents to the survey indicated that they had net additions to their employment over the last 6 months, while only 11% reported net losses. During more prosperous economic times around 25 to 30% of the participants showed a net gain while 8 to 10% showed a loss. While we are getting close to the pre-recessionary levels for hiring, we are not there yet.
The average business participating in the survey increased its payroll by 0.7 new employees in the last 6 months. This compares to hiring around one employee in the pre-recessionary years. It should be noted that during the Great Recession, the average local business was reducing its payroll by 0.8 employees. So this is not only a significant improvement compared to the depth of the recession, it is closing in on the pre-recessionary hiring levels.
A third of local businesses are planning to expand their payroll employment in the next 6 months, while 4.9% of the participants are planning to reduce theirs. The average participant in the survey is planning to hire one new employees in the next 6 months. This indicator’s trend is now at its highest level since the recession.
Fifty-two percent of the businesses participating in our July survey reported
increases in their revenues over the last 6 months, while 16% reported a decline in theirs. Looking to the future, a larger 61% expect their revenues to be higher while only 10% expect to see lower revenues.
Based on the results of our July survey we expect the Valley’s economy to continue to show growth over the next 6 months. We expect local companies to increase their expenditures over the next 6 months and while their hiring enthusiasm shows a slight decline compared to April it is still close to pretty strong. For more than a year, companies with 21 to 50 employees lead employment growth in the Valley, we are now seeing that picture revert to a more normal distribution, where the growth is led by larger companies. Overall employment is expected to continue to show growth over the next 6 months.