Business Conditions: Economists Mixed on Outlook

A recent survey by the National Association for Business Economics (NABE) indicates that business conditions have improved in the past three months. The Net Rising Index for sales, which measures the difference between the proportion of respondents reporting rising sales and those reporting falling sales, reached its highest level in two years. Similarly, the Net Rising Index for profit margins reported its best reading since October 2021.

However, economists are less positive about the outlook for the coming three months. The survey found that fewer respondents expect their companies’ sales or profit margins to improve in the near term. Additionally, a smaller number of economists reported passing on cost increases to customers, suggesting that businesses may face challenges in raising prices further without triggering consumer backlash.

The survey also revealed a division among economists regarding the likelihood of a recession. While nearly six in ten respondents identified recession as a significant downside risk, two-thirds expressed optimism that the US economy will avoid a downturn.

Christopher Clarke, an assistant economics professor at Washington State University, emphasizes the limitations of the survey due to its small sample size. Nevertheless, he believes the economy is not yet showing clear signs of recession, although prolonged high-interest rates remain a major risk.

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