The FINANCIAL — A majority of businesses are expecting the U.S. economy to grow at an improved pace this year, a marked turnaround from the fall when many had a more negative view, according to Borsa Italiana – London Stock Exchange Group.
The National Association for Business Economics industry survey of 63 corporate economists, released Monday, found that 65% expect the gross domestic product to grow at a rate of 2.1% or more from the fourth quarter of 2011 to the fourth quarter of 2012.
The companies are relatively optimistic about their own prospects as well. More firms are predicting both profit margins and sales will rise versus businesses who say those measures will decline. In the association's October 2011 survey, most forecasters saw the economy limping along at less than 2.0% growth last year. The government is set to release its initial reading on fourth-quarter 2011 economic growth on Friday.
Despite the positive view, few firms expect they'll be hiring. Only 27% of those surveyed said they plan to increase their payrolls in the next six months–that's the lowest reading in the past five quarterly surveys. Most business, 64%, say they'll stand pat on hiring in the first half of 2012. How the federal government will deal with debt-reduction plans this year and what impact a standoff with Iran could have on oil prices are among the issues weighing on the minds of corporate economists, she said.
One issue of relatively little concern is the European debt crisis. Almost two-thirds of those surveyed said the crisis would have no impact on their sales–and 8%, including several financial firms, said the crisis could be a slight driver of revenue.
Hensel called the response surprising.
"With credit downgrades of nine countries, I'd expect continued downward pressure relative to the euro … as a result exports from the U.S. would be depressed," she said. Hensel partially attributed the response to relatively few of those surveyed selling directly to Europe, but cautioned that a significant deterioration in Europe will impact even non-exporters in the U.S.
The economists surveyed indicated that inflationary pressure will be subdued, as 78% of firms said their prices are staying flat and no respondents said their prices will rise by more than 5% in the next three months.
Helping keep prices in check are moderating materials costs and little pressure to raise wages. Only 31% of respondents said materials costs are rising, compared to 6 months ago when 69% saw input costs increasing. Most now see materials costs staying flat.
Likewise, 71% said wages and salaries were unchanged in the final three months of 2011.
Moderate inflation would put the Federal Reserve under little pressure to raise interest rates and give the central bank more leeway to pursue stimulus to boost the economy. The Fed has said rates will remain near zero at least until the middle of 2013. After a meeting this week, Fed officials will release their forecast for future interest rates for the first time.
