NABE Business Conditions Survey


October 2015

NABE Survey Results Indicate Slightly Slower U.S. Economic Growth


NOTE: This is a summary of the survey.  NABE Members can download the full report here.

The October 2015 NABE Business Conditions Survey report presents the responses of 106 NABE members and selected other industry economists to a survey on business conditions in their firms or industries conducted September 21– October 6, 2015, and reflects third-quarter 2015 results and the near-term outlook.

COMMENTS: “The October 2015 Business Conditions Survey results show a majority of panelists expects continued growth for the remainder of 2015,” said NABE President Lisa Emsbo-Mattingly, director of research, Global Asset Allocation at Fidelity Investments. “Respondents again marginally rolled back the optimism of their outlook. While four-fifths of the panel expect real GDP growth of more than 2% for the next year, the percentage expecting growth above 3% has fallen to 7% from 16% in July and 29% in April.”

“The panel continues to have a positive outlook, but third-quarter performance and fourth-quarter expectations softened across most indicators,” said Survey Chair Jim Diffley, senior director at IHS. “Since the July survey, respondents report slower increases in profits, prices, wages and salaries, capital spending, and employment. And expectations for increases in the coming quarter declined for sales, prices, material costs, wages and employment.”



• Sales growth was slightly more widespread in the third quarter of 2015 than in the second quarter, reversing a slowdown reported three months ago. Fifty-one percent of panelists in the October survey report rising sales at their firms last quarter, compared to 46% in the July survey and 49% in the April survey. The net rising index (NRI)—the percentage of respondents reporting rising sales at their firms less the percentage reporting falling sales—increased from 28% to 32%.

• The majority of survey panelists (51%) expects sales to rise during the fourth quarter of 2015. However, that share represents a decline from the 59% in July that expected third quarter sales to increase.

• Profit margins shrank at 22% of respondents’ firms, up from 14% in the July survey. The share of firms with rising margins narrowed to 29% from 32% in the July survey. A quarter of respondents (25%) expect profit margins to increase at their firms in the fourth quarter of this year, a smaller share than the 35% in the July survey that expected profits to increase in the third quarter of 2015.

• The NRI for prices charged dropped sharply to 2 in October, down from 23 in July and 32 in April and its lowest level in three years. The percentage of respondents reporting rising prices shrank from 23% in July to 15% in October. Respondents from goods-producing firms account for the largest share of panelists reporting falling prices, 30%.

• Declining costs in the goods-producing sector pushed the NRI below zero again in October. The percentage of respondents whose firms experienced cost declines barely exceed those whose firms experienced increases—22% to 21%, respectively.

• Expectations for cost increases in the next three months reversed course from those expressed in July and have moved sharply downward, from 16 to 4. This result was again led by goods-producing sector respondents, 33% of whom expect decreased material costs in the fourth quarter of 2015.

• The NRI for wages and salaries declined sharply over the quarter to 28 from 40 in the July survey, yet is higher than the NRI in the October 2014 survey. Compared to the March and July 2015 survey results, there is a shift away from rising wages and salaries; 33% of respondents report increases in the third quarter, compared to 42% in the second quarter and 45% in the first quarter.

• Expectations for wage increases over the next three months are lower in the current survey, indeed at their lowest level since October 2014. Forty-four percent of respondents anticipate increases in wages and salaries resulting in an NRI of 40, compared to an NRI of 47 in the previous survey.

• Survey results reflect moderating employment conditions, with the NRI slipping to its lowest level since April 2014. Roughly one-third of respondents from each sector reports rising employment during the third quarter, although the resulting NRIs by sector are quite different. Employment conditions were weakest among goods producers with 40% of respondents from this sector reporting declines for an NRI of -10.

• The share of respondents expecting their firms to increase employment in the next three months— 29%—is the smallest this year. Fourth-quarter employment growth is expected to be concentrated in the finance, insurance, real estate (FIRE) and services sectors, which have NRIs of 29 and 27, respectively. Equal shares of respondents from the goods-producing and transportation, utility, information, communication (TUIC) sectors expect rising and falling employment in their respective sectors.

• Capital spending decelerated for a third consecutive quarter as the NRI fell from 28 in July to 22 in the current survey. Thirty-six percent of respondents report an increase in spending, the smallest percentage for a year; 14% report a decline in spending. Expectations for the next three months remain similar to those in the July survey, with the NRI holding at 26.

• Investment in information and communications technology declined slightly from last quarter with the NRI falling to 32 in October from 34 in July. However, there is a variance within results, as the number of respondents reporting an increase in technology spending at their firms and the number of respondents reporting a decline both increased. Expectations for spending over the next three months are more optimistic than they were in July, as the NRI for next quarter’s spending increased from 29 to 38.

• The NRI for the structures component of capital spending improved, rising from 11 to 21, with 29% of respondents reporting increasing spending and 8% reporting decreasing spending. Expectations also improved slightly due to fewer firms expecting to see a reduction in structures spending over the next three months.

• More than one-third (36%) of respondents report that their firms experienced shortages of skilled labor, about in line with the July survey results, but an increase from the nearly one-quarter of firms in the previous three surveys. As before, there are few reports of minimal shortages of other inputs.

• Four out of five respondents expect inflation-adjusted gross domestic product, or real GDP, to grow between 2.1% and 4.0% from the third quarter of 2014 to the third quarter of 2015. While four-fifths of the panel expect real GDP growth of more than 2% for the next year, the percentage expecting growth above 3% has fallen to 7% from 16% in July and 29% in April. No respondent expects real GDP to grow faster than 4% or to decline on a year-over-year basis. The October survey results are in line with those in the July survey.

• Roughly half of respondents (49%) report that their firms had difficulty filling open positions over the last three months, a slight increase from 46% in the previous survey. The percentage of respondents from FIRE sector firms reporting difficulty filling open positions—63%—has risen substantially from the shares in the two previous surveys: 43% in the July survey and 33% in the April survey.

• The economic impact from lower oil prices appears not to have had a material effect on about half (48%) of survey respondents’ firms over the third quarter. While 30% of respondents indicate their businesses were negatively impacted, 22% report that the decline in oil prices has had a positive impact. A slight majority (55%) of respondents from goods-producing firms reports a significant or minor negative effect on their businesses, an increase from the 42% in the previous survey.

• Nearly two-thirds of survey participants (64%) report that the economic slowdown in China has had no material impact on their firms in the last three months. At the aggregate level, current survey results are nearly identical to those in the July survey.

• The appreciating U.S. dollar has not had any material impact on the majority (57%) of survey respondents’ businesses in the past three months. Nonetheless, while a small share of respondents (7%) reports a positive effect, a larger share (37%) indicates a significant or minor negative effect on their businesses over the third quarter of the year.

• The survey panel is split on whether a potential increase by the Federal Open Market Committee (FOMC) in its target for short-term interest rates in the next three months would have a material impact on their businesses. Twenty-two percent of percent indicate they expect there would be a negative effect, down from 37% in the July survey.