Survey Shows Growing Concern about the US Economy

on Jul 18, 2012
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On 16 July 2012, Bloomberg reported the results of a new survey by the Washington-based National Association for Business Economics (NABE), which showed growing pessimism among companies regarding the US economy. The companies which participated in the survey indicated that they were planning to limit hiring due to growing concerns about the US “fiscal cliff” and falling sales on account of Europe’s debt crisis.

The survey, which was taken from June 14 to June 26, suggests less confidence in the US economy, with 40 percent of the 67 NABE members forecasting that the gross domestic product will grow two percent or less over the next 12 months. The number of “GDP pessimists” is up from only 23 percent in the previous NABE poll, which was conducted in April. In addition, about 62 percent of businesses project no change in employment over the next six months, up from 48 percent in the NABE’s April report. Over half of the panellists in the July survey reported unchanged sales and unchanged profit margins, with only 39 percent reporting rising sales, which is significantly lower than the 60 percent of respondents reporting rising sales in April.

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!m[](/uploads/story/137/thumbs/pic1_inline.png)“The survey results suggest worsening economic conditions,” notes Nayantara Hensel, chairwoman of the NABE outlook survey committee and professor of Industry and Business at the National Defence University in Washington, as quoted by Bloomberg. “The rising sales and profit margins experienced earlier in the year may have been short-lived,” she notes.

The pessimism evident in the survey is perhaps also indicative of lack of confidence regarding the measures which the government is taking so as to stimulate economy growth. Although quite recently the Chairman of the Federal Reserve, Ben Bernanke, reaffirmed the commitment of the Fed to act if necessary, it seems that Mr Bernanke’s somewhat vague rhetoric regarding the actual measures fails to ease the concern of US businesses.

As noted in the Bloomberg article, one of the factors determining the pessimistic view of US companies is the Eurozone crisis which is hurting demand, with 47 percent of the respondents reporting that their sales have fallen due to the turmoil overseas, up from 24 percent in the April poll.
The NEBA survey results also register concerns about the US “fiscal cliff”, with 65 percent of the panellists predicting that sales will drop if the fiscal cliff cannot be avoided. The fiscal cliff, whose main component is the upcoming expiry of the tax cuts introduced during the Bush era, has become one of the main factors determining the growing pessimism about the US economy. On 17 July 2012, the Financial Times reported the results of the Bank of America Merrill Lynch Fund Manager Survey, which showed that nearly one in five fund managers view the “fiscal cliff” as a bigger cause for concern than the
Eurozone debt crisis. In addition, the BofA Merrill Lynch survey showed that investor confidence in US equities fell steeply in July, whereas conviction that companies could increase profits fell to the lowest point since the spring of 2009.

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