Business Economists Give Thumbs Up to US Economy

Survey reports rise in sales and profits; goods producers lead increase in payrolls.

The U.S. economy is strengthening and nearly two-thirds of companies are seeing growth in their sales, according to a new industry survey from the National Association for Business Economics.

Sales growth accelerated during the fourth quarter of 2013, the survey found, with 63% of the panelists reporting rising sales at their firms and only 9% reporting a drop in sales.

Companies are also keeping more of their sales, the survey found. Some 34% of companies saw their profit margins increase in the fourth quarter. Just 8% of companies had a drop in margins.

A major reason for the improvement in profitability is that 85% of panelists said their companies’ costs were flat or declined in the last quarter.

Skilled labor continues to be a concern, with 26% of the panelists citing a shortage. But overall, 65% said their companies were not suffering from a shortage of any kind.

Despite the good news, panelists indicated little improvement in employment growth. During the fourth quarter, only 27% of their organizations increased employment levels. However, goods producers showed a larger uptick, with 45% adding to their payrolls.

Looking ahead for the next six months, 37% of companies said they would be hiring. In the goods-producing sector, 50% said their firms were likely to add employees, while 25% expect no change and 25% forecast a decrease through attrition.

Panelists reporting their firms will increase capital spending over the coming year edged up from 47% in the last survey to 53% in the current survey. Nearly half of the companies are expected to spend more on computers and communications equipment. However, the number of panelists anticipating increased spending on structures fell from 20% in the fall to 10% in the current survey. For goods-producing firms, 73% said capital spending would increase over the coming year, with 55% saying the increase would be 10% or less.

A majority (69%) of panelists expect the U.S. economy to grow by 2.1% to 3.0%. A smaller number expect stronger growth of 3.1% to 4.0%, but none of the economists anticpate GDP exceeding 4.0%.

Two topics much in the news – the Affordable Care Act and the Federal Reserve’s reduction in monetary support – largely received a shrug from economists, with majorities anticipating no material impact to their firms from the implementation of either the health law or the Fed’s actions.

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