By Steven K. Beckner
(MNI) – The National Association for Business Economics’ latest
industry survey finds few current wage-price pressures amid continued
economic sluggishness in the third quarter, but the survey’s coordinator
warned Friday that inflation could be set to accelerate.
Although they remain in the minority, a significantly larger number
of business economists in the October survey reported that their firms
have raised prices and/or are likely to do so.
Meanwhile, barely more than a third of 67 NABE members surveyed on
business conditions in their firm or industry conducted between Sept. 28
and Oct. 9 reported rising sales. And well over half reported no change
in profits.
And economists in the goods-producing and service sectors do not
expect much help from the Fed’s effort to stimulate economic activity
through its third, $40 billion per month round of mortgage bond
purchases.
The NABE said “almost two-thirds of the panelists do not expect the
third round of quantitative easing to indirectly affect their company’s
sales over the next six months.”
“The survey suggests continued flatness in sales, profit margins,
and employment, as well as expectations of moderately slow real GDP
growth,” said Dr. Nayantara Hensel, chairman of the NABE Industry Survey
and Professor of Industry and Business at National Defense University.
Hensel said “the negative impact of the European crisis has
lessened, although panelists continue to be concerned about its future
impact, as well as the impact of potential U.S. government spending cuts
in January, and the expiration of Bush-era tax cuts in December.”
“About 45% of panelists report unchanged sales and 58% of panelists
report unchanged profit margins,” he said.
Hensel said “inflationary pressures are largely flat,” but he
warned they “are exhibiting some increase relative to the last survey.”
“Although inflationary pressures and inflationary expectations
largely continue to remain flat, there is an increased potential for
rising inflationary pressures,” he said, noting that “about 20% of the
panelists reported that the prices charged by their firms over the past
three months have risen, which is more than twice the share of panelists
reporting rising prices in the July survey.”
Hensel said “about 23% of panelists suggest that the prices charged
by their firms will increase over the next three months, which is an
increase from the 12% of panelists who held this view in the prior
survey.”
“Almost one-third of the panelists reported rising materials costs,
which is higher than the 22% of panelists reporting rising materials
costs in the July survey,” he continued. “About 43% of panelists expect
primary, non-labor input prices to increase over the next three months,
which is higher than the 26% of panelists who held this view in the
prior survey.”
“Nevertheless, inflationary pressures and inflationary expectations
remain generally unchanged in that 72% of panelists report unchanged
prices over the past three months, two-thirds of the panelists expect
that the prices charged by their company will not change over the next
three months, about 60% of the panelists report that the materials costs
of their firms over the past three months have been unchanged, and about
45% of panelists expect that primary non-labor input prices will not
change over the next three months.”
Hensel said “the labor market exhibits continued stability in that
over four-fifths of the panelists report that their wages and salaries
have been unchanged, over two-thirds of the panelists reported unchanged
employment at their firms, and over half of the panelists suggest that
their employment is likely to remain unchanged over the next six
months.”
A higher share of panelists reported rising capital expenditures in
this survey (31%) relative to the prior survey (20%), although almost
two thirds of the panelists reported unchanged capital spending.
Almost two-thirds of the panelists forecast moderately slow real
GDP growth of between 1.1% and 2% from the third quarter of 2012 to the
third quarter of 2013, while over one-third of the panelists forecast
real GDP growth exceeding 2%.
Hensel said “the panelists express significant concerns about the
impact on their sales if Bush-era tax cuts expire in late December and
the automatic government spending cuts take place in early January.” But
he said “these concerns have not worsened since the last survey, and
remain stable.”
If the so-called “fiscal cliff” hits, about 63% of the panelists
expect their sales to fall.
The Fed’s policymaking Federal Open Market Committee, on Sept. 13,
approved an open-ended program of mortgage backed security purchases to
spur growth. But the NABE survey found that almost two-thirds of the
panelists “do not expect the third round of quantitative easing to
indirectly affect their company’s sales over the next 6 months.”
The NABE said over three-quarters of the panelists in the
goods-producing sector, the services sector, and the TUIC
(transportation, utilities, communication, and information) sector hold
this view.”
But it said “the panelists in the FIRE (finance, insurance, and
real estate) sector, however, have a different view in that 73% of
panelists expect that the third round of quantitative easing will
indirectly affect their company’s sales over the next six months.”
The NABE said “the impact of the European crisis on the sales of
the panelists’ firms has become less negative since the last survey,
possibly due to greater stability in the trajectory of the European
crisis and possibly due to adjustments in corporate strategy to mitigate
risk.”
“About 34% of the panelists indicate that the European crisis has
directly led to a decrease in their company’s sales, which is less than
the 47% who indicated a decline in their sales in the prior survey,”
said Hensel. “About 60% indicate that their sales have stayed the same.”
He said “the expectations of panelists regarding the impact of the
European crisis over the next six months have also improved.”
** MNI **
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