National Association for Business Economics

The most recent survey to come from the National Association for Business Economics (NABE) had a more optimistic sound from those of recent quarters.  The real GDP growth rate for the next several quarters is expected to be over 2 percent.  When asked about prices, respondents tended to feel price stability will improve.  The one sour part of the report comes from employment expectations.  Companies are anticipating slower jobs growth as fewer expect to increase hiring in the next six months. While jobs have been a sticking point in our post recession recovery, the rosier outlook for other economic components is encouraging.

Profit margins are one significant area where companies are reporting positive developments.  Thirty percent have seen an expansion in the difference between sales and costs.  More than half felt margins remained the same and only fifteen percent reported they declined.  Here is the rub – those experiencing falling sales grew to 19 percent; this is the largest reading in recent quarters.  Recoveries tend to excite purchasing, but only 40 percent recorded an increase in sales.  Additional margins can only do so much before a pick-up in receipts is required to keep earnings growing.

One way for margins to grow is to increase the costs of goods and services.  This time around 78 percent of the companies kept prices the same.  But drilling further into this portion of the report signals a difference between the production and service sides of the economy.  Not one goods-producing company mentioned falling prices while 70 percent showed rising prices.  On a positive note, nobody expects their prices to rise or fall by more than 5 percent in the next three months.

NABE is an interesting indicator because it looks at both soft and hard data.  The soft data comes in the form of opinions about the future like the price expectations just mentioned or estimates for real GDP growth.  The hard data is derived from actual developments within the companies being surveyed such as sales and margins.  Overall, this release shows both soft and hard components improving.  With our recovery now over two-and-a-half years old and still feeling nothing but squishy, Atlas sees this as marginally encouraging.  (by C. Cox)