The National Association for Business Economics (NABE) said that sales growth fell to its lowest level in seven years. In the latest Business Conditions Survey, the net rising index for sales dropped sharply from 32 in January to 4 in the latest survey, its smallest reading since April 2009. The percentage of respondents suggesting that their sales had fallen over the past three months rose from 15 percent in the last report to 25 percent this time, with 41 percent of goods-producing firms citing reduced sales. As a result, the net percentage saying that their profits were rising dropped from zero in January to -5 percent in April. With that said, businesses were cautiously optimistic about activity improving over the next three months, with 46 percent anticipating rising sales and 31 percent predicting improved profit margins.
The labor picture remained mixed. The net percentage of respondents suggesting that their employment levels rose over the past three months declined from 19 percent to 11 percent, but hiring mostly held up relative to the decreases seen elsewhere in the survey. Indeed, 29 percent of those completing the survey said that employment had risen, with 18 percent suggesting that it had fallen and 53 percent citing unchanged levels. In contrast, the goods-producing industries – which include manufacturing – were less upbeat regarding labor conditions. The net percentage of goods-producing respondents citing higher levels of employment dropped from 15 percent to -11 percent, with 37 percent of firms noting reducing hiring. The outlook for the next three months on the hiring front were equally down.
The capital spending numbers were similar. The net percentage rising figure for capital spending over the past three months declined from 25 percent to 14 percent. Yet, for goods-producing firms, the net percentage reporting increased capital investments plunged further, down from -4 in January to -19 percent in April. Expectations for goods producers was marginally positive for the next three months, with a net percentage of 4 percent seeing growth in capital spending moving forward.
In terms of forecasts, the percentage of business economists expecting real GDP to grow by 2.1 to 3.0 percent in 2016 dropped from 70 percent in January to 57 percent in April. Roughly one-third now see the U.S. economy expanding by 1.1 to 2.0 percent this year. At the same time, roughly half of the goods-producing respondents said that they were experiencing difficulties in filling open positions over the past three months, with 50 percent citing challenges from the global slowdown and 44 percent reporting negative effects from falling commodity prices.
Note: NAM Chief Economist Chad Moutray is one of the respondents to this survey, and he will participate in a teleconference about the results on April 18 at 3 pm ET.
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