WASHINGTON – More companies hold an optimistic outlook toward investing in new equipment than hiring, a survey showed, another sign the labor market will struggle to improve.
Fifty-four percent of companies said they will boost capital spending over the next 12 months, compared with 43 percent that plan to increase payrolls by the end of the year, according a results of a poll taken last month by the National Association for Business Economics issued Monday. Respondents also scaled back forecasts for economic growth as sales and profits cooled.
The economic landscape is weakening and the recovery is softening, Shawn DuBravac, chief economist for the Consumer Electronics Association in Arlington, Va., who analyzed the report, said in a statement. Sales growth remains positive for the majority of firms responding, he said, but that majority is now smaller than it was last quarter.
Mondays report combined with slowing payroll gains shows employment will be slow to recover the 8.75 million jobs lost during the recession, raising the risk that household purchases will weaken further.
The index of the outlook for investment in new equipment and software over the next year, which reflects the difference between those planning increases and decreases, climbed to 50, seven points higher than in the last survey issued in April. The measure of capital spending projects already initiated last quarter rose to 36, the highest level in more than five years.
The employment index for last quarter dropped compared with the groups April survey as more companies said they dismissed workers. A growing number said they planned to decrease payrolls through attrition than in Aprils report, while the number of firms planning significant firings held at zero.
The survey underscores other data indicating the labor market has weakened. U.S. employers added 18,000 workers to payrolls in June, the fewest in nine months, as the unemployment rate rose to 9.2 percent, according to Labor Departmentfigures.
Fewer companies reported rising profit margins even as investment plans improved. Twenty-nine percent of firms said their profits increased last quarter compared with 45 percent in Aprils survey.
Fewer firms also said sales grew, while more reported costs rose. The surveys sales index dropped to 47 from 54 in the previous survey, while 69 percent of firms reported rising costs compared with 63 percent three months ago.
Purchases at retailers rose 0.1 percent in June, the Commerce Department reported last week. Sales excluding autos were little changed, the poorest performance since July 2010.
U.S. companies cut their projections for economic growth, according to the survey. Seventy-six percent of respondents said they expected gross domestic product to expand by more than 2 percent compared with 94 percent in the April survey.
Seventy-three NABE members responded to the survey, conducted between June 16 and June 29. The National Association for Business Economics is the professional organization for people who use economics in their work.