Sales Growth at Fastest Pace in Year, NABE Says
WASHINGTON -- The growth of sales during the first quarter was the fastest in a year, the National Association for Business Economics finds in a report released today, and the association expects growth to continue this quarter.
Fifty-eight members of the association of business economists responded to a survey conducted between March 19 and April 2. For the most part they reported that sales at their firms rose during the first quarter, gains in profit margins and capital spending increased following slowdowns the fourth quarter of 2012, and the number employed holds steady.
Regardless the association finds, “The employment outlook is at its healthiest in nearly two years, while more than half of survey respondents expect their firms will boost capital spending in the next 12 months.”
“Overall, the panel is more upbeat regarding the economic outlook than it was in the January survey,” says Timothy Gill, chairman of the NABE Industry Survey Committee and director of economics at the National Electrical Manufacturers Association. Two-thirds still expect the economy to grow at a better than 2% rate this year with 60% saying the economy “will advance at a restrained pace of between 2% and 3%.”
“The optimism is restrained,” Gill elaborated, “as only 5% expect real GDP [gross domestic product] growth to expand faster than the economy’s long-run trend growth of 3%.”
The increase in sales came despite tighter fiscal policy, that is, lower government spending, which includes sequestration. Some 16% of the business economists report sales were lower than they otherwise would have been because of less government spending but nearly four in five reported no effect and 5% reported greater sales.
Employment at the firms the economists serve held steady for the most part. An incrementally smaller share of panelists reported employment rose at their companies compared to the preceding quarter, 25% versus 22% respectively, while 12% said employment fell. Only 7% said that absent reduced government spending employment would have risen.
Expectations of increased hiring rose to 32%, the highest figure in nearly two year, after doubling to 22% from 11% in January. Forty percent of respondents expect their companies to increase their hiring over the next six months, up from 34% in January. Only 9% foresee a decline, down from 13% in January.
Capital spending rebounded the first quarter, the economists reported, with 25% reporting an increase while 27% reported a decline in the last quarter of 2012. More than half, 51%, expect their companies to increase capital spending over the next 12 months, up from 40% in January and in line with the 52% last October.
The economy is strong enough that companies have raised their prices and expect the increases to stick. Nearly a quarter of the companies, 24%, report price hikes while 7% say they have lowered theirs.
The cost of raw materials and labor rose during the first quarter, the economists reported, and while shortages of raw materials were minimal, the shortage of skilled labor was pronounced, with 24% saying skilled labor is in short supply.
Low inflation should continue, the National Association for Business Economics says. Only 27% expect their companies to raise prices this year, down from 40% in the January survey. Most expect prices to hold steady and very few foresee their costs declining, which would allow them to lower their prices.
SOURCE: National Association for Business Economics
Published by The Business Journal, Youngstown, Ohio.
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