U.S. business economists are slightly more optimistic about economic growth than they were three months ago, and most foresee sales at their companies remaining solid.
Those findings emerge from the latest survey by the National Association for Business Economics being released Monday. It found that 67 per cent of the business economists who responded to the survey are expecting moderate economic growth of 1.1 per cent to two per cent over the coming year.
That was essentially unchanged from the October survey. But the proportion of business economists who expect significantly stronger growth of 2.1 per cent to three per cent jumped to 30 per cent from 20 per cent in the previous survey in October.
“Respondents … are more bullish about economic growth over the coming 12 months than they were in October,” said Constance Hunter, president of the business group and the chief economist at accounting firm KPMG. She noted the sizable jump in the proportion who expect growth to be as strong as three per cent this year.
The government will report this week on economic growth, as measured by the gross domestic product, for all of 2019. Many economists have estimated that growth last year slowed to around 2.3 per cent, from 2.9 per cent in 2018, which had been the strongest performance since 2015.
The general expectation is that 2020 growth will slow further to perhaps 1.7 per cent. That would be a disappointment for President Donald Trump, who insisted as a candidate in 2016 that his policies would double the lacklustre economic growth of the past decade to annual rates of four per cent or better.
Still, speaking at an economic forum last week in Switzerland, Trump proclaimed that the U.S. economy is benefiting from “extraordinary prosperity,” with the lowest unemployment in a half century and a record-high stock market.
The NABE business survey, compiled from 97 responses of NABE members from late December through early January, found that for the first time in a decade there were as many respondents reporting declines in employment at their companies as were reporting increases.
But Megan Greene, chair of the NABE business survey panel, said ”this may have been due to difficulty finding workers rather than a pullback in demand” for workers. She noted that the survey found a significant increase in the percentage of companies that reported shortages of unskilled labour. And nearly half reported shortages of skilled labour.
To help attract workers, roughly half of those responding to the survey said their companies had raised wages in the past three months. An even bigger 62 per cent expect their businesses to raise wages in the coming quarter.
Among the factors boosting optimism, the survey found more businesses reporting expectations of rising revenue, stronger profit margins and increased sales prices than in the October survey.
Plans to boost capital spending, which have been depressed in large part because of the uncertainty caused by Trump’s trade wars, edged up slightly but still remain at their second-lowest level since 2016.
But 61 per cent of businesses said that the higher tariffs imposed by the trade conflicts with China and other countries hadn’t affected their businesses in a significant way. Among those businesses that did feel an impact, 20 per cent said the adverse effects had been felt in falling sales. Nineteen per cent said the trade conflicts had contributed to higher costs.
The NABE survey was taken after the announcement of a ceasefire in the trade war between the United States and China, capped by the signing of a preliminary agreement between the two sides. That accord is to be followed by negotiations on an expanded deal.
The new survey of business economists found that 63 per cent don’t expect a significant effect on their sales this year from trade developments. Fifteen per cent think trade will benefit their sales this year. An equal proportion expect further negative consequences.