Survey: US corporate economists see growing economy despite rising oil prices, interest rates

Despite uncertainty in Washington and rising oil prices and interest rates, companies are upbeat on the prospects for economic growth in the next year, according to a quarterly survey of business economists.

But economists surveyed by the National Association for Business Economics weren’t as optimistic about hiring, according to the survey released Monday. Only 27 per cent reported rising employment at their firms from July through September, down from 29 per cent in the second quarter. And 37 per cent expected their companies to expand payrolls in the next six months, down from 39 per cent in the second quarter.

The slower hiring occurred even as sales and profit margins grew during the third quarter, according to the survey.

Still, optimism about future economic growth remained strong last quarter. Almost 70 per cent of the economists in the survey predicted gross domestic product growth of 2-to-3 per cent, with another 19 per cent expecting growth of 1-to-2 per cent. The figures are nearly identical to those from the second-quarter survey, released in July.

The U.S. economy grew at a 2.5 per cent annual rate from April through June, an improvement from the first three months of the year. But many economists worry that the growth rate may be slowing.

The NABE surveyed 60 of its member economists between Sept. 16 and Oct. 1, with most of the survey finished prior to the partial government shutdown that began Oct. 1. The economists work for companies from a variety of industries, including manufacturing, transportation and utilities, finance, retail and other services.

Among the findings:

— Sales growth accelerated in the third quarter. Forty-two per cent of the economists reported rising sales at their companies, up from 35 per cent in July. Only 12 per cent reported falling sales, down from 15 per cent in July.

— Profit margins also rebounded. One-third of the economists said margins were up at their firms, up from 21 per cent in July and the highest percentage in more than a year. Those reporting falling profit margins fell to 19 per cent, down from 25 per cent in the second quarter.

— Only 16 per cent of economists said their firms were raising wages and salaries, down from 19 per cent in July and 31 per cent in April.

— Most economists, 81 per cent, said the Affordable Care Act had no impact on employment during the past three months. But a “sizeable minority,” 18 per cent, reported a negative impact. And 22 per cent expected a negative impact on employment in the next year, compared with only 2 per cent expecting a positive impact. The responses also suggested a small shift toward more part-time and fewer full-time employees, according to the survey.

— Most economists, 80 per cent, reported no impact on their businesses in the third quarter from rising long-term interest rates, according to the survey.

But a quarter of the economists expect rising interest rates and increasing oil prices to drag on sales during the next 12 months.

Twenty-five per cent expect a negative impact from rising rates, but 62 per cent expect no impact.

Also, 25 per cent of panelists expect rising oil prices to hurt sales in the next year more than in the past three months, but a majority, 64 per cent, expects no impact.