Business plans to boost spending
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Profits are rising, but new jobs remain illusive
October 29, 2003
chicagobusiness.com
(Reuters) — Most U.S. businesses saw demand rise in the third quarter and an increasing number plan to boost spending in the year ahead, a survey out Wednesday showed, offering another sign the recovery is gaining speed. However, the outlook for employment was more mixed.
The survey of 110 businesses by the National Association for Business Economics found 22 percent of firms reported rising capital spending versus 17 percent who said it was falling. It was the second straight quarter showing a net rise in business spending, which economists believe is critical to the economy's health.
In addition, NABE said 46 percent of survey respondents expect their firms to increase capital investment over the next 12 months compared to 18 percent who expected a decline.
The upbeat picture was bolstered by stronger demand across all sectors in the July-to-September period, with 53 percent of firms reporting rising unit demand — up from 43 percent in the second quarter survey.
``Demand expanded at the highest rate since the fourth quarter of 1999 and in all industry sectors, something we haven't seen in a long time,'' NABE president Duncan Meldrum said in a statement.
``Profits also expanded across all sectors, and capital spending was modestly positive for the second quarter in a row,'' he said.
UNEMPLOYMENT MARS PICTURE
Still, not all the findings were rosy, with employment falling for the 11th straight quarter -- the longest string of declines since 18 quarters from 1989 to 1994.
The employment reading did improve slightly, with 13 percent of respondents reporting that employment was rising, up from 11 percent in the July survey. Twenty-two percent said jobs were still declining, down from 24 percent last survey.
The outlook for the next six months was also marginally better, with 21 percent of firms expecting increased hiring — equal to the 21 percent who expect employment to fall through attrition or layoffs.
That compared to 20 percent who saw more hiring and 24 percent who expected decreases in the July survey.
``The good news for employment is that expectations for future hiring are slightly brighter for all industries except goods-producers,'' Meldrum said, noting that hiring prospects over the next half year were the most favorable in the finance and services industries.
He said only goods-producers still expect to cut both employment and capital spending — highlighting the continuing split between service sector strength and the beleaguered manufacturing sector.
Profit margins rebounded in the third quarter after falling the previous two quarters, and respondents in most industries said they expect increases in selling prices over the next three months. Manufacturers were the notable exception.
Firms were also generally more optimistic about economic growth in the second half of 2003, with 57 percent predicting real gross domestic product growth to average 3 percent or more, up from only 24 percent of respondents who forecast such a healthy rate of growth in the previous survey. |
