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Survey: US economy gaining momentum

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Survey: US economy gaining momentum

Business leaders and economists see a bright 2015.

According to a survey released by the National Association of Business Economists, the US economy is right on track.

While respondents indicated that sales growth improved only slightly during the fourth quarter of 2014, a solid majority of survey panelists from all sectors expect that sales will rise during the first quarter of 2015, and over a third reporting increased profit margins.

“For many companies, the great deflation in oil prices was the most consequential economic shock of 2014."

The survey also revealed a sharp decline in rising prices. Only 16% of survey respondents reported rising prices at their organizations compared to 25% in previous surveys taking in October and July. The share of respondents reporting no change in prices increased from two-thirds to almost three-quarters (74%).

Further, almost two-thirds (65%) of respondents expect no change in the prices their firms will charge in the first quarter of 2015. This is virtually identical to the 66% in the October survey who expected no change in prices in the fourth quarter of 2014.

“Business conditions continued to improve in the fourth quarter of 2014,” NABE President John Silvia, chief economist for Wells Fargo Securities, said in the report. “There are strong expectations for the first quarter, especially for jobs and wages, backed up by strong capital spending. Moreover, price and cost pressures appear to be subdued.”

“For many companies, the great deflation in oil prices was the most consequential economic shock of 2014. Three-quarters of survey panelists expect lower oil prices to impact their business in 2015, with most anticipating a positive impact,” said Survey Chair Jim Diffley, senior director, IHS. “Investment by the oil and gas industry has been a key driver in US economic growth. The big question for 2015 is the impact of lower prices on that investment and its concomitant supply chain.” 

Wages and hiring

The news on the labor front was good as well.

The share of respondents reporting increased wages and salaries at their firms increased to 31% in the fourth quarter of 2014, up from 24% in October’s survey and 23% in the January 2014 survey. Still, this reflects a slowdown from the trend in wage and salary increases during the first half of 2014.

Expectations for rising wages and salaries rose significantly, with over half (51%) of survey respondents anticipating increases in the first three months of 2015.

A third of survey respondents (34%) indicated that employment increased at their firms. This is similar to the share of respondents who reported rising employment in the previous two surveys.

Expectations for hiring in the first quarter of 2015 are stronger than the final quarter of 2014. The overall NRI for employment was 29, up from 25 in October. 

Investment

Capital spending jumped in the fourth quarter of 2014. More than half of respondents (51%) indicated increased spending at their organizations compared to a third who cited increased spending in October’s survey. Respondents were similarly upbeat about future capital spending in the first quarter of 2015, as 48% expect their firms to increase capital spending during the first three months of the year.

Investment in information and communications technology was even stronger than overall capital spending, with 56% of respondents reporting increases in the last quarter of 2014.

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