Business More Upbeat On Economy, NABE Survey Shows

Steve Liesman

After a first quarter swoon, business is more upbeat about the current quarter and the rest of the year--especially when it comes to hiring, profits and productivity, the latest survey by the National Association for Business Economics shows.

What's more, the survey showed inflation at the consumer levels is in check.

Blue Skies Ahead... Mostly

The second quarter NABE survey shows industry demand rebounding from a multi-year low in the prior quarter. It's not returned to the elevated levels of last year, but NABE economist Kenneth Simmonson says it bodes well for growth in coming quarters.

There's also good news for workers: a net 18% of the 109 companies surveyed say employment is rising, the best level since July 2006, but businesses say they continue to struggle with shortages of skilled labor.

The result: costs are rising, both for employees and materials with the surge in commodity prices. They are at their highest level in the survey since 2004.

But prices charged by companies, that is, at the consumer level, actually fell.

This looks like a classic profit margin squeeze where companies face higher costs but can't pass them along.

Yet companies reported a handsome snapback in profit margins. The reason: fully 91% said productivity increased. That efficiency helps businesses shoulder higher costs.

Meanwhile, most business said they have not changed their investment plans because of either rising energy costs or higher interest rates.