Some improvement in business economists’ assessment of GDP growth prospects

Business economists have become bit more bullish on economic growth, the Associated Press reports.

U.S. business economists are slightly more optimistic about economic growth than they were three months ago, and most foresee sales at their companies remaining solid.

Those findings emerge from the latest survey by the National Association for Business Economics being released Monday. It found that 67% of the business economists who responded to the survey are expecting moderate economic growth of 1.1% to 2% over the coming year.

Last month, we discussed the previous NABE survey, summarizing it this way:

slower growth, heightened downside risk, and a slim likelihood of a recession in the next six months.

From today’s NABE release.

“Respondents to the January 2020 NABE Business Conditions Survey are more bullish about economic growth over the coming 12 months than they were in October,” said NABE President Constance Hunter, CBE, chief economist, KPMG. “As in the October 2019 survey, about two-thirds of respondents expect inflation-adjusted gross domestic product (real GDP) to increase by 1.1% to 2.0% over the next four quarters. But the share expecting stronger growth jumped from 20% of respondents in October to 31% in the current survey.” 

“For the first time in a decade, there are as many respondents reporting decreases as increases in employment at their firms than in the previous three months,” added NABE Business Conditions Survey Chair Megan Greene, senior fellow, Harvard Kennedy School. “However, this may have been due to difficulty finding workers rather than a pullback in demand. There was a significant increase in the percentage of firms reporting shortages of unskilled labor, while nearly half reports shortages of skilled labor.

Concerns remain, particularly in labor supply.

There is a notable increase in the share of respondents reporting shortages of unskilled labor shortages—from 11% in October to 18% in the current survey—marking a new high for this labor-input. The percentage of respondents reporting skilled labor shortages held steady at 43% in January 2020, and remains below the January 2019 peak of 53%. In contrast, 43% of panelists report no shortages of labor, capital goods, or other inputs at their firms.

The AP report adds,

The NABE survey was taken after the announcement of a ceasefire in the trade war between the United States and China, capped by the signing of a preliminary agreement between the two sides. That accord is to be followed by negotiations on an expanded deal.

The uptick is welcome. We should mention NABE survey was of 97 economists. And, overall, we remain concerned by the record-level pessimism expressed by global business leaders.