January 2019 National Association for Business Economics Outlook Survey

With the government shutdown on hiatus, Atlas looks forward to getting back to a normal economic release schedule.  Of course, this presumes another shutdown isn’t just a few weeks away.  Last week we lost access to Durable Goods Orders and New Home Sales from the Census Bureau.  So today we’ll look at an old friend of Atlas’, the National Association of Business Economics (NABE) business conditions survey. 

NABE conducts a survey with its members who are professional economic forecasters.  This is a soft-data survey comprised of opinions, albeit informed opinions.  Fortunately, the consensus of their economic professionals is that the economy will not enter into recession within the next 12 months.  Notwithstanding the “no recession” call, more are concerned about the growth rate in the coming year. 

Those polled largely use the experiences of their employers to inform their respective answers.  Unfortunately, a growing number indicated slowing sales growth in the fourth quarter of 2018.  Looking ahead, expectations for further sales growth is waning as well.  Growing profit margins are also falling as firms have been less able to raise prices even as costs (think labor) inch higher.  Hiring is becoming more difficult in skilled positions according to the survey, so wages could continue moving up as firms compete for a dwindling number of available workers.

One question stood out because such an overwhelming majority of business economists agreed on the answer.  Eighty-four percent indicated that one year after the passage, the 2017 Tax Cuts and Jobs Act has not caused their firms to change hiring or investment plans.  Atlas is particularly disappointed to hear this because we would like to see business investment pick up the pace as growth in consumption wanes.  It would make a nice economic handoff which could allow the economy to maintain its position in the virtuous portion of the business cycle.

From the vantage point of NABE, the economy is poised to continued growth but will do so at a slower pace.  Sound familiar? Atlas sees it in the data points we write about.  Deceleration is commonplace in these notes.  Fortunately, it does not look like a recession is coming just yet.  Of course, a slowing economy is more susceptible to exogenous shocks, so let’s all try to avoid those.