Business economists’ outlook darkens

A SURVEY of United States business economists in mid-April found that one-third of their companies had shut down at least some of their operations, and two-thirds had laid off or furloughed workers or cut their pay to try to minimise the impact of the coronavirus.

The National Association for Business Economics, NABE, reports in a survey released Monday that economic prospects have nosedived, with 86 per cent of the 107 NABE members who were surveyed expecting a shrinking gross domestic product over the coming year. And for the first time since the Great Recession, which ended in 2009, more business economists reported falling sales than rising sales at their companies over the past three months.

NABE President Constance Hunter, the chief economist at KPMG, noted that the April survey “represents a very different world than the one we inhabited during the last survey in January”.

The results reported Monday reflect responses gathered from April 13 to 16. During that time, most Americans were complying with stay-at-home guidelines, and millions of workers were being laid off because of business shutdowns as the economy came to a near standstill.

The survey found that the outlook for sales, profit margins and capital spending is the worst it has been since the 2008 global financial crisis. Survey respondents also expect sharp drops in wages and employment over the next three months.

A third of the respondents said their companies had been “severely impacted”. Still, three-fourths said they expect their companies to be able to stay afloat over the next six months without federal assistance. Thirty per cent said they think they can resume normal business operations within five to eight weeks.

Asked whether their companies planned to seek federal assistance from various aid packages enacted by Congress, 46 per cent said no and 22 per cent said yes. An additional 33 per cent said they didn’t know, or said their companies hadn’t yet decided whether to seek government assistance.

Just before the virus hit, the unemployment rate had reached a 50-year low of 3.5 per cent. Asked where they expected unemployment to be a year from now, more than half the NABE respondents said it would be somewhere between six per cent and 9.9 per cent. Twenty-eight per cent said they thought it would be 10 per cent or higher. And 20 per cent said they expect it to be between three per cent and 5.9 per cent.

AP