NABE Panel: Pessimism Prevails Regarding Sales, Profits, Costs, GDP
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There was an increase in the percentage of respondents whose firms raised prices in the latest quarter, with 60% of goods-producing firms in the panel having done so. But only 34% of respondents, far fewer than in January, expect to be able to raise prices in the coming quarter, while 13% of respondents expect to cut prices.
Tight credit market conditions appear to be having a larger impact on the economy compared with the January survey. Thirty-nine percent of respondents stated that tightening credit conditions have negatively affected their business, up from 26% in January. Roughly one-in-five respondents stated that actions by the Federal Reserve of either lowering interest rates or credit access liberalization had a positive effect on their business, with the finance sector experiencing the greatest impact.
Fewer than half of the respondents (45%) expect a further substantial slowdown in housing markets over the next six months, down a bit from January. Still, another 47% expect a mild slowdown in housing. Respondents in the TUIC (66%) and goods-producing (55%) sectors were affected to a greater extent.
Capital spending growth in the first quarter declined from the last survey, although spending was still above its historical average. Capital spending plans for the coming year pulled back in the most recent survey. This decline was spread across all sectors, especially in services. Expectations decreased for computer and communications equipment outlays and for structures investment, with the services sector reporting the largest declines in plans. Only 8% of respondents said they would add or accelerate investment as a result of depreciation provisions of the "stimulus" bill.
Employment conditions are beginning to weaken, with fewer firms hiring and more firms reducing payrolls. During the first quarter, 23% of respondents reported rising employment at their firms, while 15% reported job cuts, resulting in the smallest positive margin in four years. Hiring plans for the next six months are cautious: 34% of firms plan to increase employment, while 22% will cut jobs.
Skilled labor remains the only major input that is in short supply. Some 38% of firms reported a shortage of skilled labor, little changed from the quarterly surveys of the past two years.
