Profit margins remain under pressure, registering a -25 net rising index (NRI) in the survey, down from -10 in the October. NRI measures the percentage of panelists reporting rising profit margins minus the percentage reporting falling profit margins.
This is the worst reading since mid-2020. To be sure, the outlook for profit margins over the next three months is higher, with an NRI of -7, up from -17 in October.
As for their outlook on the economy, slightly more than half of respondents put the possibility of a recession over the next year at 50% or higher.
Higher interest rates and costs are the biggest threats, the economists said. But the upside possibilities are lower interest rates and costs, increased labor force participation and improved supply chains.
Economists Have Job Concerns
In addition to the recessionary fear, "for the first time since 2020, more respondents expect falling rather than increased employment at their firms in the next three months," said NABE President Julia Coronado, president of MacroPolicy Perspectives.
And, 'fewer respondents than in recent years expect their firms' capital spending to increase in the same period."
But overall, respondents offered a mixed picture of economic conditions.
"The survey results reveal an unevenness across indicators," said NABE Business Conditions Survey Chair Carlos Herrera, chief economist at Coca-Cola North America.
"Wages rose at a majority of respondents' firms in the last three months of 2022, and more firms added workers than reduced headcounts." But then he noted the depressing profit margin data.
When it comes to prices, "the panel suggests that inflation may be easing, with the outlook for prices charged at its lowest reading since the October 2020 survey," Herrera said.
"Materials costs have drifted down significantly since last July, and more respondents expect falling costs in the next three months."
Roubini Foresees Crisis
Meanwhile, Nouriel Roubini, the chief economist of Atlas Capital who predicted the financial crisis of 2007-09, is a bit more pessimistic than the NABE panel.
"A host of interconnected mega-threats is imperiling our future," he wrote in a commentary on Project Syndicate.
"The stubbornly low inflation of the pre-pandemic period has given way to today's excessively high inflation."
In addition, "secular stagnation — perpetually low growth owing to weak aggregate demand —has evolved into stagflation, as negative supply shocks have combined with the effects of loose monetary and fiscal policies."
Interest rates are soaring, "creating the risk of cascading debt crises," Roubini said. Deglobalization and protectionism are the rules of the day.