US business economists see economy slowing this year

18 July 2011 18:55  [Source: ICIS news]

WASHINGTON (ICIS)--US business economists have scaled back their expectations for the nation’s economic growth this year, with a survey on Monday reporting a retreat in sales growth and a considerable decline in company profits in the second quarter.

The National Association for Business Economics (NABE) said its quarterly survey of members showed that corporate economists have lowered their expectations for US economic growth this year, with 76% of respondents predicting that gross domestic product (GDP) will exceed 2% this year.

At the end of the first quarter, fully 94% of NABE member economists were expecting US GDP to top 2% for full-year 2011.

In addition, only 11% of business economists see any prospect for US 2011 GDP reaching 3% growth for this year, down from the 37% who held that view three months ago.

In a normal economy, US GDP would be expected to expand at a rate of 3% to 3.5% annually. Economic performance below that pace would not be sufficient to reduce the nation’s continuing high unemployment, now at 9.2%.

The survey results showed that sales growth retreated at member companies during the second quarter, with only 56% of responding economists reporting higher sales in the period compared with 63% who said sales were improving during the first quarter.

Furthermore, “profitability declined considerably in the recent quarter, with 29% of respondents indicating rising profitability, down from 45% who held this view in April,” NABE said.

NABE noted that materials costs have continued to rise while producers’ selling prices have not seen parallel increases, resulting in lower margins.

“In the goods-producing sector, more respondents indicated that profit margins are falling at their firms than those who said they are rising,” the survey reported.

That could indicate less market demand for US chemicals in months ahead, because the broad US manufacturing industry is a key downstream consuming sector for chemicals and plastics.

On the positive side, NABE said the survey indicates that slightly more member firms will increase hiring in the near term. The report said that 42% of responding companies expect to do more hiring, an improvement from the 40% recorded at the end of the first quarter.

The percentage of member companies that expect to increase capital spending in the near term also improved, the association said, with 41% of firms indicating they will spend more on structures, computers and communications equipment, an improvement from the 38% who had such plans in the April survey.

NABE is a 52-year-old professional association for business economists.

($1 = €0.71)

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