Tepid U.S. Growth Expected Later This Year-Survey

U.S. corporate profits will be smaller, demand for goods will diminish, hiring will slow and weaker growth is expected later this year, a survey released on Monday showed.

The National Association for Business Economics survey of business conditions also found that mortgage defaults forecast later in the year were expected to have a negative impact on their business in the next six months.

Nearly a third of the 107 businesses across all major industry sectors surveyed between March 26 and April 10 said mortgage defaults would have such an impact.

Roughly two-thirds of NABE panelists said they expect inflation-adjusted gross domestic product to grow at an annual rate of between 2% and 3% in the first half of 2007. But 28% of the respondents expect growth in the first half to fall short of 2%.

Only a fourth of those surveyed said capital spending would rise -- the smallest share of respondents in more than three years.

"Respondents also scaled back their capital spending plans for the coming year," NABE said in a statement. Forecasts of spending on computers and communications equipment also slowed, while capital spending on structures over the next 12 months is expected to be restrained.

Nonetheless, industry profit margins increased for a 15th consecutive quarter, albeit at a diminished rate. "The improvement was confined to the goods-producing and services sectors," NABE said.

Among those surveyed, 51% reported higher material costs in April compared with 30% in the prior January survey. Cost increased were broadly based across sectors.

Skilled labor remained the only scarce production input, with 35% of respondents reporting shortages in April, unchanged from the January survey. However, very few respondents reported shortages of unskilled labor.

Employment growth in the first quarter sagged, as the percentage of companies that added new workers hit a three-year low. In addition, fewer respondents than in January expect their companies to add employees in the next six months and more respondents than in the previous four quarterly surveys said they expect reduced head counts.