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The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.


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June 23, 2015


Approaching the Promised Land? Yes and No

Last Friday, we released our June installment of the Business Inflation Expectations (BIE) survey. Among the questions we put to our panel of businesses was a quarterly question on slack, asking firms to consider how their current sales levels compare to what they would consider normal.

The good news is, on average, the gap between firms' current unit sales levels and what they would consider normal sales levels continues to close (see the chart).

150623-chart

By our measure, firm sales, in the aggregate, are 1.9 percentage points below normal, a bit better than when we polled them in March (when they were 2.1 percent below normal) and much improved from this time last year (3.7 percent below normal). For comparison, the Congressional Budget Office's (CBO) estimate of slack on a real gross domestic product (GDP) basis was 2.6 percent in the first quarter (though this estimate will almost certainly be revised to something closer to 2.4 percent when the revised GDP estimates are reported later today). And if GDP growth this quarter comes in around 2.5 percent as economists generally expect, the CBO's GDP-based slack estimate will be 2.2 percent this quarter, just a shade larger than what our June survey data are saying.

Now, as we have emphasized frequently (for example, in macroblog posts in May 2015, February 2015, and June 2013), performance in the aggregate and performance within select firm groups can differ widely. For example, while small firms continue to have greater slack than larger firms, their pace of improvement has been much more rapid (see the table).

150623-table1

Likewise, some industries (such as transportation and finance) see current sales as better than normal. But others, like manufacturers, are currently reporting considerable slack—and findings from this group appear to show a marginal worsening in sales levels over the past 12 months.

Another item that caught our attention this month was the differing pace of narrowing in the sales gap among those firms with significant export exposure (greater than 20 percent of sales) relative to those with no direct export exposure. We connected these dots using responses to this month's special question, in which responding firms specified their share of customers by geographic area: local, regional (the Southeast, in our case), national, and international (see the table).

150623-table2

So things are still getting better for the economy overall, and the small firms in our panel have displayed particularly rapid improvement during the last year. But if you've got exposure to the "soft" export markets, as mentioned in the June 17 FOMC statement, you've likely experienced a slower pace of improvement.

Photo of Mike Bryan
By Mike Bryan, vice president and senior economist,
Photo of Brent Meyer
Brent Meyer, economist, and
Photo of Nicholas Parker
Nicholas Parker, economic policy specialist, all in the Atlanta Fed's research department

June 23, 2015 in Business Cycles , Business Inflation Expectations , Economic conditions | Permalink

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