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Practice Management > Building Your Business

US Growth to Continue but at a Slower Pace: Survey

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The economic expansion will continue but growth will slow over the next 12 months, especially in goods-producing businesses affected by U.S. trade tariffs.

That’s one of the key takeaways from the latest Business Conditions Survey released by the National Association for Business Economics. 

Less than half of respondents to the survey expect GDP growth, adjusted for inflation, will rise by more than 2% over the next four quarters — down from 53% in April and 67% in January.

“Lower growth is expected over the next 12 months,” said NABE President and KPMG Chief Economist Constance Hunter, in a statement. “It is important to note, however, that all respondents still expect the current economic expansion to continue during this timeframe.”

U.S. GDP rose 2.1% in the second quarter, according to preliminary data released by the Commerce Department, down from 3.1% in the first quarter and following 2.5% growth for all of 2018 — well below the White House’s 3% target.

Seventy-six percent of business economists working in the goods-producing companies  reported that tariffs have had a negative effect on business conditions at their firms, resulting in higher costs and lower sales.

Also for the first time in seven years, business economists reported as many price increases as declines over the past three month.

Looking ahead, survey respondents were less optimistic about sales and profit margins in the next three months than they were three months ago, following declines in both over the past three months. The net rising index (NRI) for profit margins had fallen into negative territory, -6, over the past three months. 

Fewer respondents in the July survey, compared to April’s, expect wages and employment at their firms will rise in the next three months, but more of them expect capital spending at their firms will increase. 

The forward-looking NRI for capital spending rose to 42 in July — the highest level in a year, led by the finance, insurance and real estate sectors.

Fewer respondents also reported skilled labor shortages in the latest NABE survey. For the first time since October, less than 50% of respondents reported a shortage of skilled labor. 

The NABE surveyed 119 business economists between July 1 and July 10, but not all answered every question. Thirty-five percent worked at companies with 100 or fewer employees; 15% at firms with 101-1,000 employees and 41% from companies with more than 1,000 employees.

— Check out Business Economists Cut US Growth Forecast on ThinkAdvisor.


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