Business Economists Upbeat on Rising Sales, Profit Margins

April 23, 2012
April NABE survey shows increased optimism about business conditions, some concerns about wage inflation.

A survey of business economists has 60% reporting rising sales at their firms, up from 41% in January. Sales increases were most evident in the goods-producing sector, with 83% of those surveyed in manufacturing and other related industries by the National Association of Business Economics reporting higher sales.

Rising profit margins were also reported by 40% of those surveyed, compared to 30% in the last quarterly survey. In the goods-producing sector, 44-45% of the panelists reported rising profit margins while slightly less than half reported their companies' profit margins were unchanged. Less than a quarter reported declining profit margins.

Nearly two-thirds of the economists polled predicted U.S. GDP will grow between 2.1% and 3% from the fourth quarter of 2011 to the fourth quarter of 2012. Some 15% forecast that GDP will exceed 3%, much higher than in previous surveys.

Goods-producing companies led the way in charging higher prices, with 55% reporting price increases from their firms.

"The panelists suggest continued stability in prices, with the possibility of some upward pressure," said Dr. Nayantar Hensel, a professor of Industry and Business at National Defense University who analyzed the data from the quarterly survey. "As in the prior surveys, over half of NABE panelists continue to report unchanged materials prices, while 37% report rising materials costs."

Employment showed little change in the first quarter, with 59% overall reporting no change in employment. In the goods-producing sector, 33% reported rising employment and 25% reported falling employment levels. But looking ahead to the next six months, 39% predicted more hiring, a jump from 27% in January.

Unlike employment, there was more evidence that wages already are on the rise. NABE noted that 44% of panelists reported higher wages and salaries in their firms, up significantly from the previous four surveys. Just under half reported no change in wages.

While only 29% overall of economists reported rising capital spending, 60% of the economists in the goods-producing sector said spending at their firms had increased.Some 36% of panelists in the goods-producing sector expect capital spending to increase by 10% or less over then next 12 months.

Neither the potential for higher oil prices or the European debt crisis seem to have the panelists overly concerned, Hensel observed. "Only 11% of NABE panelists expect the maximum price for West Texas Intermediate crude oil will exceed $130 over the next six months. Over 70% of panelists have reported no impact of the European crisis on their sales and expect little impact over the next six months, he said.

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