Bloomberg News

Companies Grow Pessimistic About U.S. Economy

July 16, 2012

Companies are growing more pessimistic about the U.S. economy this year and plan to limit hiring as the European debt crisis hurts sales and concern rises over the looming so-called fiscal cliff, a survey showed.

Some 62 percent of businesses project no change in employment over the next six months, according results of a National Association for Business Economics’ survey released today in Washington. The share is up from 48 percent in the group’s April report.

The lack of confidence signals the job market will show little progress after company payrolls rose last quarter at the slowest pace in more than two years. The data also indicated inflation will ebb as more businesses said the lack of demand will prevent them from raising prices.

“The survey results suggest worsening economic conditions,” said Nayantara Hensel, chairwoman of the NABE outlook survey committee and professor of Industry and Business at the National Defense University in Washington. “The rising sales and profit margins experienced earlier in the year may have been short-lived.”

Forty percent of the 67 NABE members responding to the survey taken from June 14 to June 26 forecast gross domestic product will grow 2 percent or less over the next 12 months, up from 23 percent in the previous poll. The share projecting growth will exceed 3 percent dropped to 5 percent from 15 percent in the April report.

Employment Cools

Companies hired 84,000 workers last month, fewer than forecast and not enough to reduce a jobless rate that’s exceeded 8 percent for more than three years, Labor Department figures showed earlier this month. The gain capped the weakest quarter for payrolls since the first three months of 2010.

Along with less employment, 70 percent of firms said salaries and wages were little changed, up from 48 percent in the prior survey. A majority of respondents, 74 percent, predict no change in the prices their firms will charge customers over the next three months, more than in any of the past four surveys, the report said.

Companies indicated concern should Congress not act to extend Bush-era tax cuts into next year and should the $1.2 trillion in automatic spending cuts known as sequestration take place. Sixty-five percent of those surveyed predicted sales will drop if this fiscal cliff can’t be avoided.

More respondents said the European crisis has already hurt demand as well. Some 47 percent of businesses said sales have fallen due to the turmoil overseas, up from 24 percent in the prior survey.

The NABE has been conducted quarterly since 1982. The National Association for Business Economics, founded in 1959, is the professional organization for people who use economics in their work.

To contact the reporter on this story: Caroline Fairchild at in Washington or cfairchild2@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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