Businesses Feel Pressured by Higher Costs

Businesses Feel Pressured by Higher Costs

According to the National Association of Business Economics (NABE), the rising costs of materials and labor are putting pressure on businesses. The NABE quarterly survey is intended to gauge business conditions at member firms and industries.

During the first quarter of 2014, 31 percent of all businesses surveyed reported higher material costs, moneysome up more than 30 percent from the previous year. Furthermore, 35 percent of the businesses reported increases in wages and salaries in the past three months, up from just 23 percent in January of 2013.

Even with the current cost pressures, most businesses are optimistic about the direction of the economy. The survey discovered that 80 percent of businesses expect the GDP to rise at least two percent over the next year.

Nearly 75 percent also stated they expect the current labor market conditions to improve, especially with unemployment projected to reduce between five to six percent over the next three years. Over the next six months, 43 percent of businesses expect their firms to expand hiring and employment. Additionally, the majority expects wage growth to remain subdued, with a growth of up to three percent over the next three years.

Capital spending among respondents rose to 38 percent, up from 28 percent in January of 2013. However, those who reported rising profit margins fell from 34 percent in January of 2013 to 32 percent in January of 2014.

Projections by respondents for the upcoming quarter show that 41 percent expect costs to increase, some up to as much as five percent. Whether they’ll be able to pass that onto customers is uncertain, however 31 percent expect their businesses to raise prices. That number is down from the 43 percent who planned to raise prices in January of 2014, but still slightly elevated from most of 2013.

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