NABE Business Conditions Survey

January 2021

NABE Panelists Report Increasing Optimism about Economic Growth over the Next 12 Months, as Profit Margins Rise at More Firms, and Expectations for Hiring Grow More Widespread 


The January 2021 NABE Business Conditions Survey report presents the responses of 97 NABE members to a survey conducted January 4-12, 2021, on business conditions in their firms or industries, and reflects fourth-quarter results and the near-term outlook.


COMMENTS: “Results of the January NABE Business Conditions Survey show that conditions continued to improve during the last quarter of 2020 after the collapse experienced during the first half of last year,” said NABE President Manuel Balmaseda, CBE, chief economist, CEMEX. “Momentum has continued to build, and survey respondents seem much more positive about the future today than in October. Furthermore, expectations regarding GDP growth continue to improve, with 69% of respondents expecting growth in inflation-adjusted gross domestic product over the next year of 3.0% or higher, compared to just 59% in the October survey.” 




• Respondents’ views continue to coalesce around an expansionary outlook for growth in inflation-adjusted gross domestic product (real GDP), with 69% of panelists expecting GDP to expand by 3.0% or more. Just 2% of respondents anticipate negative growth over the year ahead (ending in Q4 2021). This compares favorably with results of the July 2020 survey in which nearly 40% of respondents anticipated shrinking output growth over the four quarters ending in Q2 2021, as well as with results in the October 2020 survey in which roughly 10% viewed negative growth as most likely.

• Just over half (51%) of respondents report that sales at their firms increased in Q4 2020, nearly matching the 52% in the October survey who reported an increase in Q3. The share that reports a decrease in sales declined from 20% in October to 13% in the January survey. As a result, the Net Rising Index (NRI) for sales—the percentage of panelists reporting rising sales minus the percentage reporting falling sales—climbed to a two-year high of 38, up from 33 in October and -14 in July. The forward-looking NRI for anticipated sales over the next three months continues to rise, from 31 in October to 38—the highest reading since the April 2019 survey.

• Profit margins reversed course in Q4, with more respondents reporting profits rising than falling. The NRI for profit margins increased 18 points to 14 from -4 in October. The share of respondents reporting rising profit margins increased from 21% in October to 30% in January, while the percentage reporting falling margins declined 9 percentage points— from 25% in October to 16% in January. Of the survey’s four sectors, the goods-producing sector experienced the largest jump in the NRI for profit margins, a 56-point swing from -18 in October to 38 in January.

• The NRI for prices charged is 15, having surged 14 points from October. NRIs by sector, however, vary significantly. The January NRI for goods-producing firms is 71, after registering 21 in October. The index for finance, insurance, and real estate (FIRE) sector firms remains negative at -12, up from -19 in October. Between these extremes are the NRI for service sector firms, with a reading of 8, up from 3 in October, and the NRI of 25 for the transportation, utilities, information, communications (TUIC) sector. The share of respondents expecting price increases in the next three months continues to rise—35% in January compared to 26% in October—resulting in an NRI of 30. Five percent of panelists anticipate falling prices in the next three months.

• The NRI for materials costs accelerated to an NRI of 28, the highest reading since April 2019. All sectors registered positive NRIs, led by goods-producers at 62. The NRI for expected costs rose significantly, from 8 to 34, after having been as low as -21 in April 2020.

• The NRI for wages and salaries rebounded to 19 in the January survey, a clear continuation in the recovery from the depths of the COVID-19 slump during 2020. The upward movement in the index resulted from an increase in the share of respondents citing rising wages—to 28% from 17% in October—and a decrease to 9% from 13% in the share reporting falling wages.

• The NRI for employment rose to 7—the highest reading since October 2019, and the first positive value since April 2020. The share of respondents citing decreased hiring activity fell from 27% to 13%, while 19% report employment increased at their firms compared to 9% in the October survey. All sectors have positive NRIs. The NRI for the services sector rose from -5 in October to 6. The largest increase is in the goods-producing sector, up 54 points to 8 in January. Respondents remain optimistic regarding the near-term outlook for employment, as the forward-looking NRI rose to 21 from 1 in the October survey. Respondents from all sectors expect their firms will add jobs rather than reduce headcount in the near term.

• Fifty-six percent of respondents report there were no shortages of inputs in Q4 2020—slightly smaller than the percentage in the October survey. The largest increase is in the share of respondents reporting shortages in skilled labor—up from 16% in October to 24%. The share reporting shortages of unskilled labor increased from 2% to 7%.

• After negative readings for three straight quarters, the NRI for capital spending bounced back strongly in the fourth quarter, rising from -8 to 15—the highest reading in one year. Twenty-eight percent of respondents report that capital spending at their firms rose during Q4, up from 19% in Q3, with the percentage citing declining investments shrinking from 27% to 13%. Six-in-ten note no change in capital expenditures over the past three months. The forwardlooking NRI for capital spending is strongly positive, rising from 6 in October to 22 in January. The percentage of respondents expecting increased activity jumped from 19% to 34%.

• Businesses continue to make changes to employment and wages in response to COVID-19, albeit less so than in the October survey. Reducing employee headcount was the most common response, cited by 34% of respondents. But this is down from 54% in October and 68% in July.

• Respondents’ near-term outlook is little changed compared to that in the October survey. Thirty-four percent of respondents report a “Better” outlook compared to a month ago, down slightly from 36% in October. Only 6% cite a “Worse” near-term outlook, compared to 8% in the previous survey.

• Sales volumes improved in the fourth quarter of 2020. Fifty-two percent of respondents report sales volumes at “76-100% of pre-crisis level,” up from 46% in the previous survey. Furthermore, 23% indicate that sales at their companies are already above pre-crisis levels, matching the October reading, and led by the TUIC and goods-producing sectors.

• Nearly one-third (32%) of respondents reports that sales volumes have already returned to their normal level of operations, while 36% expect that to happen sometime in 2021.

• Only 5% of respondents report that their firms have either applied or are planning to apply for Main Street Lending programs, up slightly from 3% in the October survey.

• Roughly half (51%) of respondents anticipates that their firms will suspend their stay-at-home policies in the second half of 2021, up from 22% in the October survey.

• Eleven percent of panelists expect that all of the staff at their firms will eventually return to pre-pandemic working arrangements. Those from the services sector account for the largest share holding this view.

• Nearly half of respondents (46%) indicates that the vaccine rollout or new administration will have “No” impact on their firm’s outlook for sales, hiring, capex, etc. Conversely, 37% of respondents indicate “Yes, positive,” while 5% cite “Yes, negative.”


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