NABE Business Conditions Survey


July 2015

NABE Survey Shows Continued Confidence in US Growth

NOTE: This is a summary of the survey.  NABE Members can download the full report here.


The July 2015 NABE Business Conditions Survey report presents the responses of 112 NABE members and selected other industry economists to a survey on business conditions in their firms or industries conducted June 17-July 1, 2015, and reflects second-quarter 2015 results and the near-term outlook.

COMMENTS: “The July 2015 Business Conditions Survey results show a majority of panelists expect solid growth for the remainder of 2015,” said NABE President John Silvia, chief economist at Wells Fargo. “Respondents are marginally less bullish than they were in previous surveys.” “The panel reports markedly increased shortages in the July survey, especially of skilled labor,” said Survey Chair Jim Diffley, senior director at IHS. “One half of the respondents continue to expect rising wages going forward.” 


• Sales growth was less widespread in the second quarter of 2015 than in the first quarter, following a similar slowdown three months ago. Only 46% of panelists in the July survey reported rising sales at their firms last quarter, compared to 49% in the April survey, and 54% in the January survey, which covered the fourth quarter of 2014.

• A majority of survey panelists (59%) expects sales to rise during the third quarter of 2015. However, that share represents a decline from the 71% in April that expected second-quarter sales to increase.

• Profit margins increased at more firms in the second quarter than in the first. Nearly one-third (32%) of respondents reported wider profit margins compared to the 26% reporting wider margins in the first quarter. Fourteen percent reported that margins shrank, down from 16% in the April survey. In both the July and April surveys, 35% of respondents said they expected profit margins to increase at their firms in the coming quarter, but more respondents to the current survey (10%) than the April survey (3%) said they expected a decline in their businesses’ margins.

• The percentage of respondents reporting rising prices charged by their firms shrank in July’s survey— to 23%—down from the 32% in April. Seven out of ten (71%) reported prices were unchanged from the first quarter. After a volatile swing—down in January, up in April—July’s Net Rising Index (NRI) of 16 is very near its level throughout 2014. The NRI is the difference between the percentage of respondents reporting an increase and the percentage reporting a decrease.

• The share of the panel expecting selling-price increases rose slightly in July compared to the share in the April survey. Twenty-six percent (26%) of respondents project price increases in the third quarter of 2015. Still, more than two-thirds of respondents (69%) expect no change in the third quarter.

• The NRI for materials costs returned to positive territory (+9) for the first time this year. The percentage of respondents whose firms experienced cost declines dropped to 15 in July, down from 25 in April. The share of respondents reporting rising materials costs increased slightly to 24 from 21 in April’s survey, and is well above the January 2015 survey low of 13.

• For a second consecutive quarter, the share of respondents expecting cost increases climbed to 23% in July, up from 19% in the April survey and 14% in the January survey.

• The NRI for wages and salaries held relatively steady quarter over quarter—40 in July versus 43 in April. A slightly smaller share of respondents reported rising wages and salaries at their firms in the second quarter (42%) than in the first quarter (45%), while the percentage reporting a decline ticked up from 1% to 2%.

• Close to half of the panel (49%) anticipates wages will increase in the next three months (compared to 51% in the January survey and 46% in the April survey). Only 2% of respondents expect their firms to reduce wages and salaries in the next three months, similar to the 1% who held that view in the April survey.

• The share of survey respondents reporting increased employment at their businesses during the second quarter rose modestly to 36%, up from 35% in April and 34% in January. Falling employment was reported by a larger percentage of respondents than in April: 12% of the panel reported employment declined at their firms in the latest quarter compared to 7% in the previous survey. Employment declines were more prevalent for goods producers (25%) and transportation, utilities, information, communications (TUIC) firms (17%) than for finance, insurance, real estate (FIRE) firms (9%) or services businesses (5%).

• As measured by the NRI, expectations for hiring in the third quarter of 2015 edged higher compared to those for the second quarter. The overall NRI was 31 in July, up from 29 in April’s survey. The share of respondents expecting increases in employment held steady at 41% over the quarter, while a slightly smaller share of respondents expect declines in the third quarter (10%) than had expected them in the second quarter (12%).

• Capital spending advanced at a smaller share of respondents’ firms in the second quarter of 2015, as 12% of panelists reported falling investment compared to the 7% in April’s survey (for spending in the first quarter). The NRI fell for a second consecutive quarter, to 28, from 32 in the April survey; it had been as high as 46 in January’s survey The NRI for expected spending for the next three months fell to 26, from 30 in April and 40 in January.

• Investment in information and communications technology rebounded a bit from the previous survey’s results, with the NRI rising to 34 from 27 in April after a high reading of 53 in January. Two-fifths of survey respondents reported rising spending, up from one-third in April.

• The NRI for the structures component of capital spending was relatively unchanged at 11 in July, with 23% of respondents reporting increasing spending and 12% reporting decreasing spending.

• More than one-third (35%) of respondents reported their firms experienced shortages of skilled labor, up from around one-quarter of firms in the previous three surveys. As before, there were only minimal reports of shortages of other inputs.

• The majority of survey participants continue to expect solid economic growth despite disappointing first-quarter 2015 economic data. Four out of five respondents expect inflation-adjusted gross domestic product, or real GDP, to grow between 2.1% and 4.0% from the second quarter of 2014 to the second quarter of 2015.

• Slightly less than half of respondents (46%) reported that their firms had difficulty filling open positions over the last three months. This compares to the 43% in the previous survey.

• Over the last three months, the economic impact from lower oil prices has not had a material effect on about half (51%) of survey respondents’ businesses. While 22% of the panel indicated their businesses have been negatively impacted, 27% indicated the decline in oil prices has generated a positive effect.

• More than two-thirds of survey participants (69%) reported that the economic slowdown in China has had no material impact on their firms in the last three months. Twenty-eight percent reported a negative impact, up from 21% in the April survey.

• The appreciating U.S. dollar has not had any material impact on the majority (54%) of survey respondents’ businesses in the past three months. Nonetheless, while a small share of respondents (8%) reported a positive effect, a larger share (38%) indicated a significant or minor negative effect on their businesses in the past three months.

• Respondents were split as to whether a potential increase by the Federal Open Market Committee (FOMC) in its target for short-term interest rates in the next three months would have a material impact on their businesses. Thirty-eight percent say they expect no material impact; 37% expect a negative effect, and 25% expect a positive effect from an increase in the FOMC rate target.