Sales Picked Up in the Third Quarter of 2013 According to New NABE Survey, but Other Results Were Mixed

The October 2013 NABE Industry Survey report presents the responses of 60 NABE members to a survey on business conditions in their firms or industries and reflects third-quarter 2013 results and the near-term outlook. The survey was conducted between September 16 and October 1, 2013, largely prior to the start of the partial shutdown of the federal government on October 1.

COMMENTS: “Results from NABE’s October 2013 Industry Survey suggest the economy continues to expand at a moderate pace,” said Timothy Gill, Chair of the NABE Industry Survey Committee and Deputy Chief Economist at the National Electrical Manufacturers Association. “Sales growth accelerated in the third quarter, despite potential headwinds such as rising interest rates and oil prices, and a renewed wave of policy uncertainty. Profit margins rebounded after weakening in the previous quarter, while gains in capital spending matched those reported in the first half of the year. In contrast, employment growth, though still solid, slowed in the third quarter, wage and salary growth also slowed, and plans for near-term hiring and capital spending moderated. Despite these quarter-to-quarter fluctuations, the latest readings for most of these indicators fall broadly in the middle of ranges observed in the current and in previous business cycle expansions.

“Panelists’ expectations for economic growth in the next 12 months are marginally more upbeat compared to the views expressed in July’s survey. Nearly 70% forecast real GDP growth of between 2% and 3% over the next four quarters, with another nearly 20% anticipating growth of between 1% and 2%—shares almost identical to those reported in July. Slightly fewer panelists than in July now expect real GDP growth below 1% during the next 12 months, while slightly more forecast a pace of 3% or higher.

“The survey results indicate no net effect on sales from higher long-term interest rates in the third quarter, but do show a measurable net negative effect on sales from rising oil prices and on employment in advance of forthcoming Affordable Care Act (ACA) provisions. Notwithstanding their guardedly optimistic forecast for real GDP growth, panelists anticipate these factors will exert heightened drag moving forward.”


Sales growth accelerated during the third quarter of 2013. The net rising index (NRI)—the percentage of panelists that reported rising unit demand minus the percentage that reported falling demand—increased to 30, up from 20 in July and 22 a year ago. Forty-two percent of respondents reported rising sales at their firms, up from 35% in July and a larger share than any reported in all but one quarter in the previous year. Meanwhile, 12% of panelists reported falling sales, down from 15% in July.

The survey results indicated no net effect on sales from higher long-term interest rates in the third quarter, but did show a measurable net negative effect on sales from rising oil prices. Seventeen percent of panelists claimed rising oil prices negatively impacted their firms’ third quarter sales, versus 9% claiming they boosted sales.

Profit margins rebounded in the third quarter after retreating in the second. One-third of panelists reported rising margins at their firms—the highest share in over a year and an increase from 21% in July. At the same time, the percentage reporting falling profit margins slid to 19% in the current survey, down from 25% in July. As a result, the NRI climbed to 14 after having fallen into negative territory in July—to a reading of -3—for the first time since 2009.

Capital spending growth was nearly unchanged for a second straight quarter. The NRI inched upward to 20 in October from 19 in July. The NRI measured 20 in April and 23 in October 2012. The share of respondents that reported rising capital spending at their firms climbed to 29% in the latest survey from 24% in July. The share reporting falling capital spending rose to 9% from 5%.

Expectations for capital spending over the next 12 months moderated as the NRI declined to 41 in October from 47 in July. Still, nearly half (47%) of panelists expect their firms’ capital spending to increase. However, that 47% represented a decline from the 55% of panelists who held this view in July. Meanwhile, the share of panelists expecting their firms to shrink capital spending fell to 6% in the latest survey from 9% in July. Spending on computers and communications equipment is expected to continue expanding over the next 12 months, but at a slower pace than reported in recent surveys. Expectations for capital spending on structures, however, firmed in October compared to three months earlier.

Payroll gains lost some momentum during the third quarter. The share of panelists reporting rising employment at their firms edged down to 27% from 29% in July, but that result is still higher than the 18% recorded a year ago. Meanwhile, the share reporting falling employment inched up to 12%. The NRI slipped to 15, down from 18 in July but above the reading of 7 posted a year ago.

Though most panelists (81%) reported no impact on their firms’ employment over the last three months from forthcoming provisions of the Affordable Care Act (ACA), a sizable minority (18%) reported a negative effect. Only 2% reported a positive effect.

Employment expectations over the next six months also edged downward since the previous survey, with the NRI slipping to 27, its lowest reading since January 2013. Thirty-seven percent of respondents expect their firms to expand payrolls versus 10% expecting a decline. Five percent expect the decline to come through attrition, while 5% expect layoffs.

The share of panelists expecting a negative impact on their firms’ employment in the next 12 months stemming from ACA provisions (22%) outweighed the share expecting a positive impact (2%). Responses also suggest a modest shift toward relatively more part-time and fewer full-time employees.

Near-term economic growth expectations underlying current planning improved marginally in October’s survey. Sixty-nine percent of panelists forecast growth of between 2% and 3%, with another 19% anticipating growth of between 1% and 2%. These shares are nearly identical to those reported in July. Slightly fewer than in July (5% versus 10%) now expect growth of 0% to 1%, while slightly more (7% versus 2%) forecast a pace of 3% to 4%.

Despite their guardedly optimistic forecast for real GDP growth, on balance panelists anticipate that rising interest rates and oil prices will exert heightened drag on their firms’ sales in the coming year. The share expecting a negative impact stemming from higher interest rates (25%) outweighed the share expecting a positive impact (13%). Likewise, the share expecting a negative impact stemming from higher oil prices (25%) outweighed the share expecting a positive impact (11%).

The NRI for prices charged jumped to 23 in the October survey from 3 in July. One-quarter of panelists reported their firms charged higher prices over the past three months, while only 2% reported their companies charged lower prices. The remaining 73% of panelists indicated no change in their firms’ prices.

The NRI for materials costs also rose to 23 in the October survey, up from 20 in July and its highest reading since January 2012. Twenty-three percent of panelists reported rising materials costs at their firm, down from 25% in July. The share reporting falling prices shrank from 6% to 0%.

In contrast, wage and salary cost pressures diminished for a second consecutive quarter. The NRI fell sharply to 7 in October from 18 in July and 29 in April, leaving it well below levels over the past year.

Input shortages were less prevalent in the third quarter than in the second. The share of panelists reporting no shortages rose to 67%, returning to levels seen in the April and January surveys. Skilled labor continued to be the most common shortage, cited by 25% of respondents, though that represented a decline from 33% in July. Reports of shortages of other inputs were minimal.

Despite a pickup in price and materials cost growth in the third quarter, panelists’ expectations for the next three months suggest inflationary pressures remain contained. The NRI for expected sales prices fell to 11, marking its third consecutive decrease and a return to its year-ago level. At the same time, the NRI for primary non-labor input costs fell to its lowest level in more than a year at 22.





All survey panelists are NABE members who work for private-sector firms and industry trade associations. Panelists were classified into industry NAICS codes and then grouped into four sectors as follows: goods-producing; transportation, utilities, information, communications (TUIC); finance, insurance, real estate (FIRE); and services. Industry groupings, beginning with the January 2007 survey, are as follows:

Goods-producing: NAICS 11 Agriculture, forestry, fishery, hunting; 21 Mining; 23 Construction; 31-33 Manufacturing. Transportation, Utilities, Information, Communications

(TUIC): NAICS 22 Utilities; 48-49 Transportation & warehousing; 51 Information–publishing, software, broadcasting, Internet publishing and providers, telecommunications, etc. Finance, Insurance, Real Estate

(FIRE): NAICS 52 Finance and insurance—credit intermediation, including commercial and savings banks, credit unions, mortgage bankers; securities and other financial investments, trust, pension funds; health insurance and other insurance; 53 Real estate, rental, leasing.

Services: NAICS 42 Wholesale trade; 44-45 Retail trade; 54 Professional, scientific, technical services; 62 Health care services; 56 Administrative, support, waste management & remediation services; 71 Art, entertainment, recreation; 72 Accommodations & food service; 81 Other services.

The charts and many of the tables display a Net Rising Index (NRI), a diffusion index calculated as the percent of responses reporting rising results minus the percent reporting falling results. Thus, the index has a possible range of +100 (all positive responses) to -100 (all negative), with 0 indicating an equal mix. All results shown are rounded to the nearest whole percentage; thus, details may not add to 100 and the NRI may not match the difference in rounded components. Shaded areas on charts indicate recessions.

A total of 60 panelists responded to the survey; the number of panelists responding to each question is included in the tables. Seven percent of the panelists were from single-person firms; 18% from firms with 2-10 employees; 21% from firms with 11-100 employees; 12% from firms with 101-1,000 employees; and 42% from firms with more than 1,000 employees.

The NABE Industry Survey has been conducted quarterly since 1982. This survey is one of three administered by NABE; the others are the quarterly NABE Outlook and the semiannual NABE Economic Policy Survey. Founded in 1959, the National Association for Business Economics is the professional association for people who use economics in their work. Timothy Gill, National Electrical Manufacturers Association; Martha Moore, American Chemistry Council; Sara Rutledge, CBRE; Stacey Schreft, Scout Investments; and Yingying Xu, Manufacturers Alliance for Productivity and Innovation, conducted the analysis for this report.





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