Survey: Fiscal cliff has been 'eh,' not Armageddon

The Associated Press

NEW YORK (AP) — Washington’s belt tightening is having just a minimal effect on businesses, according to a survey of business economists to be released Monday.

The survey, by the National Association for Business Economics, asked how higher taxes and lower government spending had affected businesses in the first three months of the year.
Ninety-three percent of respondents said the political developments had no effect on employment levels in the first quarter, and 95 percent said they had no impact on capital spending plans. The NABE did caution, however, that businesses might have already accounted for the higher taxes and lower government spending in the fourth quarter, and adjusted their hiring and spending plans before the end of 2012.

Washington did seem to have more of an effect on consumers’ spending. While most respondents — 79 percent — said there was no impact on sales, 16 percent said the higher taxes and lower government spending had hurt sales.

The NABE surveyed a small sample, 58 members, between March 19 and April 2. They represent a variety of sectors, including finance, transportation, health care and manufacturing.
Overall, the results painted a picture of businesses that are feeling better than they were in the fourth quarter, when the fiscal cliff was still looming, but not as good as they were a year ago. “Fiscal cliff” was the common parlance for the budget debates between Democrats and Republicans in the fourth quarter, who were under pressure to work out a deal before the new year. The one they hammered out includes higher taxes for workers that started in January, and government spending cuts that started in March.

Among the results:

—Fifty-five percent of respondents reported rising sales — up from 37 percent in the fourth quarter, but down from 60 percent a year ago.

—Twenty-nine percent reported rising profit margins — up from 25 percent in the fourth quarter, but down from 40 percent a year ago.

—Thirty-one percent said wages and salaries are rising — up from 27 percent in the fourth quarter, but down from 44 percent a year ago.

The improving quarter hasn’t translated into more jobs. Only 22 percent said they added employees. That was down from 25 percent in the fourth quarter, and 28 percent a year ago.

Expectations for the future followed a pattern similar to many of the other results — better than the fourth quarter, worse than a year ago. Sixty-five percent said they expect the economy to grow by more than 2 percent over the next year, up from 50 percent in the fourth quarter but down from 78 percent a year ago.

Overall, they listed global economic conditions, the possibility of further government spending cuts, and the “regulatory environment” as their biggest concerns for the next three months. The services industry, including retail, health care and restaurants, was most concerned with the possibility of further government spending cuts. The finance industry and goods producers, such as manufacturing and construction companies, were most concerned by global economic conditions.