Economy Remains Strong but Price Pressures Increase

According to a quarterly survey by the National Association for Business Economics (NABE) released today, the U.S. economy is strong but price pressures and shortages of skilled labor are on the rise.
After 11 straight quarters of growth, more companies reported rising material and labor costs, while some have been raising prices, fewer expect to do so in the near future. This trend could possibly skim profit margins after a long period of growth.
The NABE panel has become more optimistic on 2006 real GDP growth, and now almost two-thirds expect growth at an annual rate of three percent or higher in the first half of 2006. Capital expenditures increased again in the first quarter, with responses suggesting acceleration in early 2006.
In special questions about the housing slowdown, a substantial majority of the NABE respondents see evidence that it has already occurred or anticipate that it will soon, but the business impact is limited to a minority of the panel. In addition, the panel sees the U.S. domestic market as the main element of risk, upside and downside. Variances from other factors such as international business conditions, energy prices, interest rates, and labor markets take second place or lower.