WASHINGTON (MaceNews) – The latest survey of National Association for Business Economics Monday showed continuous optimism about hiring, profits and growth.
The 93 business economists surveyed saw a strong growth trajectory ahead with some seeing the second quarter’s expected spectacular result, to be reported Thursday, being maintained in several quarters ahead.
The commentary and highlights follow:
“The results of the July NABE Business Conditions Survey show that conditions remained strong during the second quarter of 2021,” said NABE President Manuel Balmaseda, CBE, chief economist, CEMEX. “Two-thirds of respondents report that sales at their firms increased in the second quarter of 2021, while only 3% indicate sales declined. In addition, most anticipate a strong trajectory for inflation-adjusted gross domestic product, or real GDP, through the spring of 2022. Eighty-six percent of respondents expect real GDP growth over the next year will equal 3% or more.”
“A record-high share of respondents reports that profit margins increased at their firms in the second quarter of 2021,” added NABE Business Conditions Survey Chair Eugenio J. Aleman, chief economist, Energy Information Administration (EIA). “At the same time, materials costs rose at a majority of respondents’ firms. “Respondents continue to be optimistic about the near-term outlook for employment,” continued Aleman. “A third of respondents reported their firms had added workers in the second quarter, and an even higher share expects an increase in their workforce in the next three months.”
HIGHLIGHTS
• The majority of respondents continues to anticipate a strong growth trajectory for real GDP. Two-thirds of respondents anticipate real GDP to expand between 3% and 5.9% over the next four quarters (Q2 2021 through Q2 2022), and an additional 20% of respondents foresee growth expanding between 6% and 8.9%.
• Almost two-thirds (66%) of respondents report that sales at their firms increased in the second quarter (Q2) of 2021, slightly higher than the 65% that reported an increase during the April survey. The share reporting a decrease in sales declined considerably, from 12% in the April survey to just 3% in the July survey.
• The net rising index (NRI) for profit margins – the percentage of panelists reporting rising profits minus the percentage reporting falling profits in Q2 2021 – is 35 – the highest reading on record. It reflects a significant jump from the profit-margin NRIs in both Q1 2021 and Q4 2020 of 23 and 14, respectively. All sectors registered positive NRIs, with the transportation, utilities, information, communications (TUIC) sector having the highest NRI at 42.
• The NRI for prices charged during Q2 2021 declined three points to 28 overall from the Q1 2021 value of 31. Respondents from the services and TUIC sectors indicate no price declines during Q2 2021, with NRIs of 26 and 33, respectively. The NRI for the goods-producing sector is 75, up from 71 in the April survey. The index for finance, insurance, real estate (FIRE) sector firms is neutral at 0.
• The NRI for materials costs in Q2 2021 increased to 59 – up from 49 in the previous quarter, and the highest reading since Q2 2018. Sixty-one percent of respondents report cost increases in Q2, up from 54% in Q1. NRIs for all sectors are positive in the July survey, led by the goods-producing sector at 92, and followed by the TUIC sector at 83. The NRI for expected costs rose from 45 in the April survey to 50 in the July survey.
• The NRI for wages and salaries surged during Q2 2021, resulting in a reading of 51 in the July survey, up from 29 in the April survey, and the highest reading since the index of 52 recorded in the January 2020 survey. There was a strong increase in the share of respondents indicating that wages rose at their firms, from 31% in the April survey to 51% in the current survey. In addition, the share that reported wages declined at their firms fell to 0%, down from the 2% in the April survey. The forward-looking NRI for wages and salaries rose from 43 in the April survey to 55 in the July survey.
• Hiring accelerated during Q2 2021, resulting in the NRI for employment rising from 9 in the April survey to 28 in the July survey. Thirty-three percent of respondents cite increased employment at their firms during Q2, with 5% reporting declines. NRIs for all sectors are positive in July, led by the TUIC sector at 46. The forward-looking NRI for employment is 36, unchanged from the April survey. More panelists in all sectors anticipate that their firms will add to rather than decrease their headcount in the next three months.
• The percentage of respondents reporting no shortages during Q2 2021 declined further, to 44% in the July survey, compared to 54% in the April survey. The share of respondents reporting shortages of skilled labor increased to 32% in the July survey, up from 29% in the April survey. Shortages of unskilled labor are reported by 16% of respondents (more than double the 6% reporting such shortages in the April survey), while 17% of respondents indicate intermediate input shortages – up from 10% in the April survey.
• Investment continued to improve for more firms in Q2 2021. The NRI for capital spending is 33, edging upward from 32 in the April survey, and the highest reading since Q3 2019. Thirty-four percent of respondents report that capital spending rose for their firms during Q2, up from 32% in Q1, with just 1% noting declining investment during the second quarter.
• The NRI for equipment, information, and communications technology spending is 38, pulling back from its reading of 47 in the April survey which was the highest reading since the October 2018 survey. The percentage of respondents reporting increased activity declined from 47% to 38%, with no respondents citing falling activity. The services sector accounts for the lowest percentage of respondents citing rising capital spending for equipment, information, and communications technology, down from 30% in Q1 to 24% in Q2.
• The NRI for capital spending on structures is positive for the first time since the pandemic began, with the NRI improving from -5 in the April survey to 2 in the July survey. Thirteen percent of respondents cite rising capital spending on structures, with 12% noting reduced activity, and three-quarters citing no changes.
• The COVID-19 pandemic appears to have made a permanent imprint on work-from-home policies. Sixty-one percent of respondents indicate that a flexible/hybrid policy will remain in place after COVID, with the TUIC sector accounting for the largest share (85%). Twenty-one percent of panelists indicate that work-from-home policies will go back to their pre-COVID arrangement.
• Thirty-nine percent of panelists indicate their firms are experiencing a worker shortage, with the shortfall most prevalent in the goods-producing sector. The reasons vary, with 14% of all panelists indicating there are not enough applicants, and 17% reporting that there are plenty of applicants, but an inadequate number of matches. •When asked when the labor shortages (if applicable) would abate at their firms, only 6% of panelists expect that to occur by the end of 2021. Eighteen percent of panelists indicate this will happen sometime in 2022, and 10% specify in 2023 or later. Nearly one-third (32%) of panelists responded, “Don’t know/NA,” indicating the uncertainty in this current environment.
• Forty percent of the panelists indicate that their companies are experiencing delays in receiving materials or other inputs, with respondents from the goods-producing sector accounting for the largest share holding this view. Twenty-two percent of all respondents specify that the delays and shortages have had a minor impact on output. Thirteen percent note that the delays/shortages have not affected output. Only 5% indicate a major impact.
• Twenty-two percent of panelists indicate that their firms are passing along higher costs attributable to delays and shortages to customers. Seventeen percent of all respondents indicate that they are experiencing shortages, but not passing along the costs to customers.
• Thirty-four percent of panelists anticipate that the increase in costs will only be temporary, with respondents from the goods-producing sector accounting for the largest share holding this view. Twenty-seven percent of panelists cite that their firms are not experiencing any significant cost increases.
• Sixty-one percent of panelists indicate that their firms’ sales volumes have already returned to their normal level of operations relative to the pre-pandemic period, up from 48% in the April survey. Fourteen percent expect that to happen sometime in 2021. Twenty-one percent anticipate sales to return to normal sometime in 2022, down only slightly from 23% in the April survey. Only 1% of panelists do not anticipate normalcy until 2023 or later, down from 4% in the April survey.