U.S. firms see higher spending

U.S. businesses expect strong economic growth to continue in the first half of 2005 and most plan to boost capital spending this year, though the outlook for hiring has dimmed, a survey showed Monday.

In a survey of 104 members of the National Association for Business Economics, 54 percent said demand was rising in the fourth quarter of 2004, up from 50 percent in October, with all sectors but services reporting higher demand.

“From the standpoint of our NABE respondents, a portrait of the U.S. economy in the fourth-quarter was one of faster growth of wages and salaries, employment, profits and capital spending, while inflation and growth of material input costs edged lower,” said Kevin Kliesen, economist at the Federal Reserve Bank of St. Louis and a NABE analyst.

“Our panelists see continued solid growth over the first half of the year,” he added.

While 60 percent said they expect capital spending to rise in the next 12 months, short-term hiring plans have softened somewhat, NABE said.

Thirty percent forecast an increase in employment over the next six months, down from 39 percent last quarter. No change in staffing was expected by 56 percent, while 14 percent said they expect to cut employment through attrition or layoffs.

Overall, the job market remains positive, with 27 percent saying employment was rising compared to 11 percent who said it was falling. The majority, 63 percent, said it was unchanged.

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Industry profit margins also remained strong, though a modest slowing in the growth of prices charged was reported for the fourth quarter after hitting a nine-year high in the third, NABE said.

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In the January survey, conducted from Dec. 15 to Jan. 12, 33 percent said their prices were rising in the fourth quarter, down from 38 percent in October. But 40 percent said they expected to raise selling prices in the next three months, up from 36 percent in October.

Material costs slowed in the fourth quarter but were up sharply from a year earlier, while the growth of wages and salaries increased for the second consecutive quarter.

In a special question on the dollar, exactly half of the respondents said they expect the U.S. currency to decline in value against a broad basket of currencies in 2005, while 22 percent predicted a rise and 27 percent saw no change.

Still, a 68 percent majority said the movement of the dollar would have little or no impact on their operating margins this year.