General economy key to rebound

Volatile economic times have translated into quarter-by-quarter fluctuations in the PCI.

French poet Paul Valery wrote, “The trouble with our times is that the future is not what it used to be.” This quote summarizes my task each quarter – and the rapidly-changing nature of the poultry industry – when I try to make sense of the data from the Poultry Confidence Index (PCI).  Volatile economic times have translated into quarter-by-quarter fluctuations in the PCI.

The PCI – which had held steady – generally increased during the fourth quarter of 2009. The Overall Index now stands at 97.3 (1996=100), up from 85.0 the previous quarter. The last time this measure has approached “normal” was two years ago. The Present Situation Index plummeted from 64.3 to 27.3. My best guess for this negative turnaround were stagnant prices coupled with continuing job worries.

Expectations are up

The Expectations Index jumped from 98.8 to 144.0. I already touched on the Present Situation Index, but what accounted for the jump in expectations? Based on the comments of our respondents, three factors fueled their optimism: a decrease in the supply of poultry, expectations of increased demand and a generally-improving economy.

Graph: Confidence trends 

While some saw the decreased supply as a blessing, others felt it might allow competitive proteins to capture poultry’s market share. These individuals often made a case for increased production to maintain position.

Economic outlook

To gain further insights, we asked three additional questions this quarter about potential plans and activities of the poultry industry. These responses help explain the rise in the Expectations index.

Chart 1: Growth outlook 

Nearly two-thirds of the respondents said that growth will be modest over the next four quarters (averaging 2.7% overall). Also, 49% said that new capital investments were underway or they expect new ones to start in the coming months. These are both positive signs for the industry.

Chart 2: Employment outlook 

On the downside, jobs will lag behind these other indicators as 82% said they were “holding steady (on job hires) until business improves.” (Note: On the downside, 10% expect more job cuts.) It appears that job creation is a condition of, not a precursor to, better economic times.

Optimism reaches high

Optimism was at its highest point ever. Much depends on expectations of increased demand, production restraints and an improvement consumers’ overall outlook.

Chart 3: Investment outlook 

We expect increased capital investment in the near term, but jobs will wait for positive milestones rather than indicators.

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