Business economists peg economic growth at 3.0% to 5.9% over next year, a slight downgrade in expectations.

Economists surveyed by the National Association for Business Economics have reduced their projections of GDP growth over the next year, citing the familiar challenges of the labor shortage, inflation, and supply-chain disruptions. 

• Forecasts for real GDP growth over the next four quarters (Q3 2021 through Q3 2022) have shifted ever-so-slightly downward relative to those in the July survey (which covered Q2 2021 through Q2 2022). Two-thirds of respondents (66%) anticipate an increase in real GDP between 3.0% and 5.9% from Q3 2021 to Q3 2022, while 28% of respondents forecast real GDP to grow between 0.1% to 2.9%, up from only 2% of respondents who held this view in the July survey.

• Almost two-thirds (65%) of respondents report that sales at their firms increased in the third quarter (Q3) of 2021—slightly less than the 66% who reported increases in the second quarter in the July survey. The share reporting a decrease in sales, however, increased from 3% in the July survey to 6% in the current survey.

• The net rising index (NRI) for profit margins—the percentage of panelists reporting rising profits minus the percentage reporting falling profits in Q3 2021—is 25, a strong reading, but also a marked decline from the Q2 2021 record high of 35. This is the fifth consecutive survey in which the NRI is positive. The services sector has the largest profit margin NRI for the quarter at 35.

NABE comments,

“The results of the October NABE Business Conditions Survey show that conditions remained strong during the third quarter of 2021,” said NABE President David E. Altig, executive vice president and director of research, Federal Reserve Bank of Atlanta. “Two-thirds of respondents—66%—anticipate an increase in real GDP between 3.0% and 5.9% from Q3 2021 to Q3 2022, while 28% of respondents forecast real GDP to grow between 0.1% to 2.9%.”

“It is clear that the finance, insurance, and real estate sector experienced a strong third quarter according to survey respondents, while the transportation, utilities, information, and communications sector suffered the largest deterioration across the board,” added NABE Business Conditions Survey Chair Eugenio J. Aleman, chief economist, Energy Information Administration (EIA). “One-third of panelists indicates that the biggest downside risk to their company’s outlook is increased cost pressures,” continued Aleman, “while the biggest upside risk to their company’s outlook is a subsidence of COVID-19 cases and fears in the U.S., cited by 31% of respondents.”

The Associated Press reports,

The nation’s business economists are slightly less optimistic about growth prospects over the next year, noting a number of threats ranging from higher-than-expected inflation to lingering disruptions from COVID-19 and snarled supply chains.

That result represented a downgrade from the previous survey in July which had found an identical 66% who believed growth would be 3% to 5.9% but 20% of those surveyed expected growth to come in at an even stronger 6% to 8.9%. In the new survey, no NABE member saw growth higher than the 3% to 5.9% range over the next year.

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