The National Association for Business Economics (NABE) said that sales and earnings improved in the third quarter. The latest NABE Industry Survey was slightly more upbeat than the slowdown that was observed in the second quarter report. The net percentage of respondents saying that their sales were rising rose from 20 percent in the second quarter to 30 percent in the third quarter. In the goods-producing sector (which includes manufacturing), 53 percent of those taking the survey noted increasing sales in the third quarter, up from 43 percent who said the same thing in the second quarter. Still, a sizable proportion, 41 percent of goods producers, had no change in their sales.
With the pace of new orders accelerating, the earnings picture was also better. The net rising index improved from -3 to 14, with one-third of respondents saying that their sales were increasing in the third quarter. At the same time, 19 percent reported declining sales, down from 25 percent the quarter before. This progress carried through to the goods-producing sector, but the data continue to reflect larger weaknesses, particularly relative to earlier in the year or to the beginning of 2012. There were 24 percent of goods producers with declining profits in the third quarter, down from 29 percent in the second quarter but up from zero in the first quarter. Meanwhile, just over half said that their profits were unchanged.
On the employment front, the pace of hiring slowed in the third quarter. There were 29 percent of industry economists in the second quarter noting increased hiring, and that rate fell to 27 percent in the second quarter. The bulk of businesses were making no changes to their employment levels, with 62 percent saying that hiring was unchanged. Similarly, almost half of goods producing firms were keeping their employment flat, with 35 percent adding to their workforce and 18 percent noting declines.
The survey also suggested that “a sizable minority” feel that the Affordable Care Act could have a negative impact on employment over the course of the next year. Eighteen percent of respondents said that it has had a negative impact on hiring over the last 3 months, with 22 percent predicting that it will have a negative impact over the next 12 months. Just over three-quarters said that it would have no impact.
In terms of forecasts, business economists tend to be cautiously optimistic about the next 12 months. Of those completing the Industry Survey, 69 percent think that real GDP will grow 2.1 percent to 3.0 percent between the third quarter of 2013 and the third quarter of 2014. That is not much different from the 70 percent who said the same thing three months ago. At the other extremes, 19 percent felt that output would increase by 1.1 percent to 2.0 percent, with 7 percent expecting growth of 3.1 percent to 4.0 percent. As such, the forecasts were just marginally higher than three months ago, particularly on the upside, but with a mostly modest outlook overall.
Chad Moutray is the chief economist, National Association of Manufacturers.
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