Real Gross Domestic Product (GDP) will grow at a rate exceeding 2% between the fourth quarter of 2011 and the fourth quarter of 2012, according to two-thirds of respondents to the January industry survey conducted by the National Association for Business Economics. NABE’s report presents the responses of 63 member companies to a survey conducted between December 15, 2011, and January 5, 2012, on business conditions in their firm or industry and reflects fourth-quarter 2011 results and the near-term outlook.
More than 80% of respondents reported unchanged or rising sales and profit margins. The survey results also suggest greater stability in prices. Nearly all respondents expect that non-labor input prices will remain unchanged or rise by 5% or less.
“The survey results suggest increased optimism concerning real GDP growth, as well as fewer inflationary or deflationary pressures,” said Dr. Nayantara Hensel, Professor of Industry and Business at National Defense University.
More than 70% of respondents reported that wages and salaries have remained unchanged. The share of respondents reporting unchanged prices charged (78%) is the highest share in recent surveys and almost all respondents expect either no change in prices or minor price increases by their companies of 5% or less.
Materials costs rose for 31% of respondents and were unchanged for 59% of them, which suggests a continued trend toward greater stability in materials prices. Although the share of respondents expecting increasing employment over the next six months continues to fall relative to prior quarters, almost two-thirds of respondents expect no change in employment— the highest percentage of panelists holding such a view in recent quarters.
A greater share of respondents reported rising capital spending in the fourth quarter than the previous quarter, which suggests improvement in the economy. Surprisingly, a significant number of the respondents are not overly concerned about the impact on their businesses of the European debt crisis, the payroll tax cut, or the Super Committee’s lack of success in developing debt reduction plans.”
The respondents in the January 2012 survey are more optimistic than in the previous survey in their forecasts about real GDP growth, and somewhat closer to the more optimistic forecasts of real GDP growth in the prior surveys in that 65% of respondents expect that real GDP will grow at a rate exceeding 2% between the fourth quarter of 2011 and the fourth quarter of 2012. This is an improvement on the 2011 forecasts of real GDP growth in the last survey in October, in which only 16% of respondents expected real GDP growth over 2% between the fourth quarter of 2010 and the fourth quarter of 2011. Only 28% of respondents suggested real GDP would grow between 1.1% and 2% in the January survey, compared to the 70% who held this view in the prior survey. In both the current and previous surveys, however, very few respondents expected real GDP growth of over 3%.
Sales continued to weaken for respondents in the January 2012 survey. Two out of five (about 41%) of NABE panelists reported unchanged sales and a similar share reported rising sales. Nevertheless, 19% reported falling sales, which is the highest share of respondents indicating falling sales in recent quarters.
Between 40% and 50% of respondents in the goods-producing, services, and the transportation, utilities, information, and communications sectors (TUIC) reported rising sales, while between 25% and 32% of respondents in those same sectors reported falling sales. Almost two-thirds (65%) of NABE panelists from the finance, insurance, and real estate sector (FIRE), however, reported unchanged sales and no respondents reported falling sales.
Nearly one-third of respondents reported rising profit margins, with more than half (55%) indicating that profit margins were unchanged, and 15% of respondents indicating profit margins had fallen. This is similar to results reported for the prior two quarters. Between 25% and 30% of respondents in the services, goods-producing, and FIRE sectors reported rising profit margins while 50% to 61% reported that profit margins were unchanged.
The highest share of respondents reporting rising profit margins were from the TUIC sector (43%); indeed, no respondents from this sector reported falling profit margins. Between one-quarter and one-fifth of respondents in the goods-producing and services sectors reported falling profit margins.
The survey results suggest greater stability in prices with less inflationary or deflationary pressures than those reported in recent surveys. In the current survey, a smaller share of respondents indicated their companies charged higher prices than in any recent survey since January 2011. The percentage of NABE panelists reporting prices were unchanged (78%) was the highest share in recent surveys. Indeed, all (100%) respondents from firms in the TUIC sector reported unchanged prices, with over 80% of respondents in the FIRE and services sectors also reporting unchanged prices.
Of those respondents from the goods-producing sector, however, 70% indicated rising prices with none (0%) reporting falling prices. The previous survey (October 2011) reflected less strong price pressure in the goods-producing sector than the current survey reflected, and more upward price pressures in the TUIC and FIRE sectors.
None of the NABE Industry Survey panelists expect the prices of their products to rise or fall by more than 5% over the next three months, which also indicated price stability. Indeed, 65% of them expect prices to be unchanged, and 32% expect a minor price increase of 5% or less. The current survey is the only one in recent quarters in which no respondents suggested significant price increases.