US economy picks up steam

US Firms Still Upbeat Amid Crosswinds From Trade War, Tax Cuts

July 16, 2018
Elsewhere in NABE’s survey were signs of rising inflationary pressures.

Donald Trump’s economic policies have been a wash of sorts for U.S. business investment.

Ten percent of respondents surveyed by the National Association for Business Economics said they have accelerated spending as a result of the 2017 tax cuts. Meanwhile, 10% said they have delayed investment because of new tariffs and other trade policies, NABE’s survey of 98 private firms or industry groups from June 14 to June 27 showed Monday.

Responses on sales, margins and the economy were generally upbeat, with the share of firms reporting rising revenues increasing to the largest in four years. The survey also showed concerns about trade were more concentrated among goods producers. Manufacturers were more likely to report changes because of trade policy, with 26% postponing investment and 16% raising prices.

It’s the latest example of trade uncertainty clouding the outlook amid robust expansion and low unemployment. Federal Reserve Chairman Jerome Powell said last month officials are starting to hear companies are postponing investment and hiring due to trade frictions, and a Bloomberg survey of economists and analysts showed responses varied widely on how long the tariffs will last and how big they will get.

NABE’s responses signal “strong sales and steady profit margins in the second quarter” along with higher wages and material costs, survey chief Sara Rutledge, a real estate economist, said in the report. “Labor market conditions are tight, with skilled labor shortages driving firms to raise pay, increase training, and consider additional automation.”

Elsewhere in NABE’s survey were signs of rising inflationary pressures. A gauge of prices charged jumped to the highest since early 2006 and indexes for all sectors rose from April.

Goods producers accounted for the largest share of those raising prices, due to higher input costs. The NABE’s index of materials costs climbed to the highest since 2011 as all respondents reported either steady or increasing costs. Expectations for further gains over the next three months also picked up.

The reading for wages fell slightly but remained elevated, bringing the two-quarter average to the highest level in survey data back to 1982. Pay increases were also seen remaining strong over the next three months.

By Jeff Kearns

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Licensed content from Bloomberg, copyright 2016.

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