--European crisis is dragging on sales for about half of U.S. firms,
National Association for Business Economics survey finds.
--Corporate economists lower their projections for growth and hiring
in next 12 months.
--NABE survey finds 65% of corporate economists expect business
revenue to fall if Congress doesn't address tax hikes and spending
cuts.
By Eric Morath
WASHINGTON--The impact of the European crisis is becoming more
pronounced in the U.S. and businesses are holding back ahead of
scheduled tax hikes and domestic spending cuts, a National Association
for Business Economics survey released Monday found.
The result is a darkening view of economic growth prospects in next 12
months, according to a quarterly survey 67 corporate and trade
association economists.
While seen as a threat for more than a year, the struggles in Europe
are now holding back sales at many U.S. companies. The survey, taken
in late June, found that 47% of the respondents said sales have fallen
within their firm or industry due to the crisis, and more than half
expect the crisis to lead to sales decreases over the next six months.
In April, only 21% of panelists held that view.
"I think the situation in Europe has worsened," said Nayantara Hensel,
a professor of Industry and Business at National Defense University
and one of the report's authors. "It's unclear whether the Greek
government will meet its fiscal targets and there is still the
possibility of an exit from the euro."
She said manufacturers and other goods producers are feeling the brunt
of the impact from Europe.
Meanwhile, the corporate economists said sales could suffer another
blow if the Bush-era tax cuts expire and the automatic government
spending cuts take place in early January.
The survey found 65% of the respondents expect sales to fall under
that scenario, including all those surveyed in the transportation,
utilities, information and communications sectors.
The economists appeared to show little faith that the U.S. government
will soon take action that would avoid an additional drag on the
economy. In the July survey, only 5% except the economy to grow better
than 3% in coming year, compared to 13% in April that expected such
robust growth in the following 12 months.
Likewise, 40% now expect growth to be below 2.0%, compared to 23% who
held that view in April.
"We're halfway through the summer and little has happened" to advance
the fiscal debate, Ms. Hensel said. "There is a real sense that
gridlock can happen in Congress, and the boulder can fall on
everyone."
That feeling of uncertainly is reflected in profit projections and
hiring plans.
Only 29% of respondents in the July survey reported rising profit
margins, lower than the 40% who saw margins increasing in April.
Similarly, just 23% expect their firm or industry to increase hiring
in the next six months, down from 39% in April and 43% a year ago.
Businesses are indicating that they'll leave positions open until they
have more certainty about the direction of the economy, Ms. Hensel
said.
On a positive note, there appears to be little inflation pressure.
Over three-quarters of the respondents reported they expect prices to
remain unchanged as material costs appear to be easing.
Flat inflation and a weaker economic outlook creates the right
conditions for the Federal Reserve to take further action to stimulate
the economy, Ms. Hensel said, including launching a third round of
bond buying.
Write to Eric Morath at eric.morath@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
July 16, 2012 00:15 ET (04:15 GMT)
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