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Economists: Slowdown in growth doesn’t change bullish outlook

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Economists:  Slowdown in growth doesn’t change bullish outlook

Q1 sluggishness attributed to bad weather, West Coast dock strike.

According to the National Association for Business Economics, the first quarter of this year was a tough one for the US economy, but prospects for growth remain positive.

The NABE’s April 2015 Business Conditions Survey, issued today, indicates that the sluggish growth experienced in the first quarter was largely the result of unusually harsh weather conditions and the now-ended doc strike on the West Coast.

“The April 2015 NABE Business Conditions Survey results indicate a marked deceleration in growth across the board in the first quarter,” said Survey Chair Jim Diffley, senior director, IHS. “However, the panel did not pull back on bullish expectations for the upcoming quarter.”

"The prices of crude oil and the dollar have not had a material impact on the outlook for the majority of respondents’ firms."

“Over the past three months, the prices of crude oil and the dollar have not had a material impact on the outlook for the majority of respondents’ firms,” said NABE President John Silvia, chief economist at Wells Fargo. “Due to unusually harsh weather and dock strikes on the West Coast, growth in the first quarter appears to be an outlier within the broader economic outlook.” 

Among other key findings of the survey:

Sales growth declined during the first quarter of 2015. The share of survey participants reporting rising sales slipped back to match October’s result of just under 50%, down from January’s 54%. However, a solid majority of the survey panel (71%) as well as large majorities of survey panelists from each sector expect that sales will rise during the second quarter of 2015,

• Profit margins expanded at fewer firms in the first quarter, with 26% of survey respondents reporting wider margins (down from 35% in the fourth quarter). The NRI in April declined to 10, its lowest level since 2013.

• The percentage of survey respondents reporting rising prices doubled in April from January, to 32%. January thus appears as an outlier, as October and July BCS results were much more positive at 25%. With only 5% of the panel reporting falling prices, the NRI surged from 6 to 26, its highest since 2011.

• Almost three-fourths (72%) of respondents expect no change in the prices their firms will charge in the second quarter of 2015, up from 65% in the January survey. The share of those expecting increases or decreases was smaller as compared to the previous survey results. Thus the overall NRI for prices in the next three months moved slightly downward, from 21 to 20.

• The share of respondents reporting rising wages and salaries at their firms increased again in the first quarter, to 45%, up from 31% in the January 2015 survey and 35% a year ago.

• After surging in January 2015, the April BCS results show expectations for rising wages and salaries were relatively stable from the previous survey. Forty-six percent of respondents anticipate increases, for an NRI of 44, compared to an NRI of 46 in January’s survey.

• There was a modest increase in the share of survey respondents reporting increased employment at their firms during the first quarter of 2015, with 35% indicating additional hiring compared to 34% in January (for the fourth quarter of 2014) and 28% in April 2014 (for the first quarter of 2014).

• As measured by the NRI, expectations for hiring in the second quarter of 2015 are unchanged from those reported in January for hiring during the first quarter of 2015. The overall NRI held steady at 29. However, the steady NRI reflects equivalent increases in the shares of respondents expecting both increases and decreases in hiring.

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