The U.S. economy should pick up in the second half of 2015, and a majority of employers expect sales to improve in the next three months, according to the latest quarterly Business Conditions Survey from the National Association for Business Economics.
“The July 2015 Business Conditions Survey results show a majority of panelists expect solid growth for the remainder of 2015,” said NABE President John Silvia, chief economist at Wells Fargo. “Respondents are marginally less bullish than they were in previous surveys.”
The survey was notable for the outsized impact recent economic changes such as the stronger dollar and the weakening Chinese economy were having on goods producers, including manufacturers, compared to other sectors of the economy.
Among the key results in the survey:
- The U.S. economy is expected to strengthen over the next 12 months. Four out of five respondents expect real GDP (adjusted for inflation) to grow from 2.1% to 4.0% from the second quarter of 2015 to the second quarter of 2016.
- Sales are expected to improve in the third quarter of the year. While 46% of the respondents said sales at their companies improved in the second quarter of 2015, 59% expect sales to grow in the third quarter.
- Companies reporting increased capital spending levels rose slightly in the past three months, up to 40% from 38% in April. However, only 30% of goods producers expect rising spending on capital goods in the next quarter, while 22% expect spending to fall. Overall, though, 49% of companies expect capital spending levels to remain unchanged in the next three months.
- Spending on information and communications technology improved in the second quarter, from 33% reporting increased spending in April to 40% in July. Some 54% indicated no change. Goods producers expect to see spending for these technologies improve from the 21% who spent more in the past quarter to 28% who expect investment to rise in the third quarter. That compares with 40% overall who expect to spend more in the next three months.
- Hiring at goods producers is expected to lag other sectors. Overall, respondents at 41% of firms predicted increased hiring, while 49% expect the hiring rate to remain unchanged. But only 26% of goods producers expected increased hiring in the next three months, compared to 46% in services.
- About half of the economists (49%) expect wages and salaries to rise at their firms in the next three months. However, respondents at goods-producing companies (including manufacturing) saw the least likelihood of wage increases – 32% - while 64% expect no change.
- Goods producers lead the pack in difficulty filling jobs. But while 52% said they were having problems finding workers, that was better than the 58% who reported difficulty in the April survey.
- Lower oil prices have had no material impact on 51% of firms overall. But 4 of 10 goods-producing firms reported either a minor or significant negative effect, up from 20% in the previous survey. At the same time, 46% of goods producers reported a positive effect from lower oil prices, up from 40% in April.
- Most companies report they are unscathed by the recent slowdown in China. Some 69% of firms have not been hurt by the slowdown in China. But that’s not the case for goods-producing companies. Some 71% of them report a negative impact, and only 25% reported no impact.
- Goods producers are hardest hit by the stronger U.S. dollar. While 69% of them reported a negative impact from the appreciating dollar, that compared to only 20% to 41% in the other economic sectors.