NABE Survey: Economists Lose Some Confidence

The National Association of Business Economists released its October survey of members. It reads much like recent documents from the Federal Reserve or other polls from the private sector. The economy is still in a growth phase, but just barely. There are small areas of light in the business environment, but they could be easily snuffed out. The last survey taken by the group was in July.

"Fifty-four percent of survey respondents believe real GDP will expand by more than 2%, down from 67% who held this view last quarter," the survey notes said. But business demand increased, which may be a good sign for future expansion. It "grew for a fifth consecutive quarter, with 59% of NABE survey panelists reporting an increase in demand at their firms -- the highest percentage in five years."

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Some of the results of the poll went against the tide of conventional wisdom about unemployment. For example, they indicated that "Job creation registered its third positive quarterly reading in a row." That certainly has not shown up in federal figures about private sector job growth. The survey also noted that "The share of respondents whose firms increased their capital spending over the prior quarter reached a two-year high of 37%." That may bode well for the economy early next year because it's an indication that some companies believe their sales will increase.

And, concerns about inflation have begun to emerge. "Materials costs continue to rise," the poll said. The rise in commodity prices that started last quarter has hit home. If a weak economy does not allow these companies to raise prices, margins are likely to be squeezed in this quarter and early next year, which should affect earnings at public companies.

Finally, there was an expectation among survey respondents that government policy will have a major impact on corporate activity. "While regulatory policy and federal taxes are expected to have a negative impact on respondents' companies' performance over the coming year, monetary policy is forecast to have a positive impact."

The survey represents a tepid endorsement of modest growth, but at least it's not relentlessly pessimistic.