In releasing the latest Industry Survey, the National Association for Business Economics (NABE) noted recent improvements in U.S. growth. In fact, Nayantara Hensel, the chair of the survey committee and a professor at National Defense University, said, “The survey results suggest increased optimism concerning real GDP growth, as well as fewer inflationary or deflationary pressures” (Note: I am a member of this committee and contributed to the report write-up).
Sixty-five percent of business economists responding to this survey felt that real GDP growth would exceed 2 percent in 2012. This reflects a significant upward revision from the prior survey, which was released in October, in which 70 percent predicted growth of between 1 and 2 percent this year.
With that said, several of the indicators were mixed from the past survey. For instance, fewer individuals noted rising sales this time overall. In the goods-producing sector (which includes manufacturing), 40 percent of respondents observed rising sales, and 30 percent stated falling sales. The number of firms reporting profits as unchanged or rising (80 percent) remained mostly the same from the past survey. On the international front, sales have fallen in recent months, reflecting some weaknesses in foreign operations.
The bulk of goods-producing respondents (67 percent) plan no change in capital spending, but none of them suggest lower spending levels.
While 30 percent of goods-producing firms observed higher material costs, that figure was lower than the 54 percent who said the same three months ago. This reflects some of the easing that we have observed elsewhere with regard to pricing pressures.
There was less positive news on employment. No respondents in the goods-producing sector reported falling employment in October; in this survey, that figure is 20 percent. The outlook numbers are also poor. Interestingly, this conflicts with many of the other sentiment surveys on manufacturing, which are more upbeat in both of these areas.
Overall, this survey reflects the dynamic nature of the current economy. On the one hand, the larger macroeconomic picture is much-improved, helping to lift optimism among the many business economists who filled out the survey. And yet, many of the company-specific indicators remain weak, including slower growth in the goods-producing industries for sales, employment and capital spending. Reduced inflationary pressures is obviously welcome news, though.
Chad Moutray is chief economist, National Association of Manufacturers.
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