Economists see pickup in business after third-quarter pause

KEY POINTS

• Business wasn't great during the third quarter, but things should pick up again through the rest of the year, according the latest survey of business economists.
• Overall, the group expects sales to continue rising in the last three months of the year.
• The improved sales forecast comes amid signs of strength in the wider U.S. economy, which has boosted that outlook as well.

Commuters exit a subway station near the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Oct. 16, 2017.

Michael Nagle | Bloomberg | Getty Images

Business wasn't great during the third quarter, but things should pick up again through the rest of the year, according the latest survey of business economists.

Profits were squeezed, jobs were harder to fill and materials prices rose in the latest quarter, according to a majority of the National Association of Business Economists. But overall, the group expects sales to continue rising in the last three months of the year.

For many companies, the rising cost of materials pressured profits because they were unable to pass along price increases to their customers. Respondents from most sectors surveyed expect that profit squeeze to ease up by the end of the year.

The improved sales forecast comes amid signs of strength in the wider U.S. economy, which has boosted that outlook as well. More than four out of five panelists expect real gross domestic product to grow by more than 2 percent in the next four quarters. That's an improvement from the last NABE forecast in July.

Despite concerns that a series of back-to-back hurricanes would dampen growth, the survey found little evidence of that. More than 80 percent said their companies saw no impact from Hurricanes Harvey or Irma. For those who reported their firms were affected, the impact was split between positive and negative impacts.

The weakness in third-quarter results is expected to show up in the latest wave of corporate earnings reports now underway.

After double-digit gains in second-quarter profits, the latest quarter has come up short. For the companies in the S&P 500 index, the combined actual and expected profit gains are coming in at less than 2 percent, according to FactSet.

But profit gains are expected to jump back into double-digit territory in the last three months of this year and continue next year.