Economists less bullish while early gains wither

DOLDRUMS::As the eurozone continues to wobble in the face of ongoing economic uncertainty, financial minds are increasingly down-beat on the chances of US growth


Tue, Jul 17, 2012 - Page 15

Economists say the sales and profit gains of early this year are disappearing, and they are increasingly pessimistic about short-term growth.

They also are gloomy because of the potential impact in the US from Europe’s financial crisis, the possible expiration of tax cuts in December and the prospect of major cuts in federal spending.

A survey by the National Association for Business Economics (NABE) released yesterday also found less evidence of hiring, confirming the trend in recent monthly jobs reports from the government.

In the quarterly survey of 67 economists who work for companies or industry trade groups, 22 percent reported rising employment this month, down from about 30 percent in the last three surveys and 42 percent a year ago. On the positive side, only 9 percent said employment was falling. The rest said it was unchanged.

Just 39 percent of the economists surveyed reported rising sales at their companies this month, down from 60 percent in April. There was a similar trend on corporate profit margins, with 29 percent reporting rising margins this month, compared with 40 percent in April.

“The survey results suggest worsening economic conditions,” said Nayantara Hensel, a business professor at National Defense University who analyzed the results for NABE. “The rising sales and profit margins experienced earlier in the year may have been short-lived.”

US employers added just 80,000 jobs last month, the third straight month of weak job growth. The unemployment rate was stuck at 8.2 percent. That has made the economy the overarching issue in the presidential election — it will be US President Barack Obama’s undoing if presumptive Republican nominee Mitt Romney convinces voters that he can do better.

The state of the economy may also determine the fate of the deep tax cuts that were passed under former US president George W. Bush and which expire at the end of December. A weak economy will bolster proponents of extending the cuts, which opponents complain favored the wealthy.

Nearly two-thirds of the NABE members surveyed this month said they were worried that their companies’ sales would suffer if the tax cuts end and automatic cuts in federal spending begin in January because of Congress’ failure to approve a long-term deficit-reduction plan.

As the economy continues to plod along at a sluggish pace, it has made forecasters gloomier about the next 12 months.

In the NABE survey, 40 percent said the economy would grow 2 percent or less over the next year. Three months ago, only 23 percent were that cautious.

That led them to lower their expectations for hiring. Only 23 percent predicted that employment would rise over the next six months, down from 39 percent who expected more hiring in April.

The economists were upbeat about one thing: They see little indication of inflation, with few reporting higher prices or raw-material costs.