Business Economists See Higher Profits, Wages
WASHINGTON -- The National Association of Business Economists foresees continuing strong economic growth as reflected by their companies earning higher profits and paying higher wages.
In its latest survey of 85 economists who work for U.S. businesses or trade associations, NABE found that a majority of the 77 members who responded “have strong expectations for increased economic growth,” said Jack Kleinhenz, president of NABE and chief economist for the National Retail Federation.
The results of the survey, conducted between June 20 and 23, were released today.
For the third consecutive time, most respondents reported continued profits but slightly lower margins, rising wages and continuing to pay more for labor but not as at high a rate, and the cost of materials remaining basically unchanged.
The number of economists who reported their companies adding to their workforces “jumped to 36% last [the second] quarter from just under 30% the previous four [quarterly] surveys,” NABE said.
Highlights of the survey:
Sales growth became more widespread during the second quarter. A larger majority of panelists reported sales increased and the minority shrank of those who reported sales decreased. Only 5% reported sales fell and 38% said sales remained at the same level while 57% said sales rose at their companies.
Profit margins grew at fewer firms. Two-thirds, 66%, of respondents reported their firms had “flat” profit margins for the quarter ended June 30 – on a par with the preceding three quarters -- with just over a quarter, 27%, saying margins increased. Just under three in 10, 29%, expect to see profits margins at their companies increase in the third quarter. Respondents from the transportation, utilities, information and communications industries “were the most positive about their industries favorable profitability during the second quarter,” NABE found, 42% compared to the 24% in the other industries.
More firms raised their prices. One-fourth of the economists who responded said their companies raised their prices during the second quarter. Leading the price hikes were the transportation, utilities, information and communications industries with four of the 12 respondents from that sector noting their companies had.
But the panelists don’t expect the trend to continue. “Pricing momentum continued to decelerate as only 21% of respondents expect their firms to charge higher prices for their products or services during the [third quarter],” the survey found.
Only 29% of panelists reported the cost of materials to their firms rose during the second quarter, down from the 31% in the previous survey. Just more than two-thirds, 68%, expects materials costs to hold steady this quarter.
Wage increases continued during the second quarter. Forty-three percent of the economists who responded said their firms paid more for labor, the third consecutive quarter their companies had increased labor expense, “and more than double the share reporting increases a year ago.” Only 35% expect to see their companies continue to pay more for labor this quarter.
The majority of respondents, 62%, said their firms had no trouble securing the resources they need to operate, whether materials or labor, both skilled and unskilled.
A growing number of respondents -- 36% last quarter compared to 28% the previous four quarters -- say their firms are hiring. Thirty-seven said they expect their firms to hire more employees this quarter, only 9% to see a reduction (whether through attrition or layoffs) and 55% to see no change in employment levels.
More than one-third of respondents, 35%, reported capital spending is on the rise at their companies. This is the largest share in nearly three years, NABE related.
Moreover, projections for capital spending during this quarter mirror capital spending last quarter. “The outlook, on net, is positive for total capital expenditures, information and communications technology and structures across all four sectors,” NABE found.
Expectations for economic growth rose again. In July, 24% of the panel project real gross domestic product growth to exceed 3% through the end of the second quarter of next year, triple the 8% in April, NABE said.
SOURCE: National Association of Business Economists.
Published by The Business Journal, Youngstown, Ohio.
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