US economy to end year in whimper: NABE survey

2011-10-25 11:22:57

US business economists expect the economy to wind up the year with tepid two percent growth at best, according to a quarterly survey released on Monday that depicted turgid business conditions.

Eighty-five percent of the economists expect 2011 gross domestic product (GDP) growth to come in at 2.0 percent or less.

Meanwhile, 15 percent see growth lower than one percent for the year, "with 3 percent planning for an outright decline," the National Association for Business Economics said in its October survey report.

In NABE's July survey, 76 percent of economists predicted growth would top two percent, and 23 percent were predicting a slower rate.

The NABE survey gave a picture of duller business conditions, with few bright spots.

The number of businesses reporting rising demand fell to 49 percent from 56 percent three months earlier.

Profit margins improved slightly in the third quarter, NABE said, but only one-quarter of firms raised selling prices, down from about one-third in the prior quarter.

Two-thirds of companies said they expect prices will not change in the next three months, but 14 percent expect prices to fall, compared with only 4 percent in the previous survey.

The employment picture was also stagnating, with the overall outlook the worst since January 2010, NABE said.

The number of businesses cutting their payrolls rose from 8 percent to 13 percent, while those adding employees dropped from 42 percent to 30 percent. The rest kept their workforces unchanged.

Companies expecting to add employees in the next six months fell to a 29 percent share from 43 percent in July. Fifty-nine percent predict no change, while three percent plan "significant layoffs," up from a zero reading in July.

The survey of 70 NABE members was conducted between September 20 and October 5.

"Expectations are muted, but growth remains the base-case scenario," Shawn DuBravac, chief economist for the Consumer Electronics Association, said in the report.

"Despite a narrowing of positive indicators, the majority of respondents remain cautiously confident."

The NABE report came ahead of the US government's first estimate of GDP growth for the third quarter slated Thursday.

Most analysts forecasted the world's largest economy grew at a 2.3 percent annual rate in the July-September period, following a 1.3 percent second-quarter pace.