Economists Report: Businesses Not Hurt by Federal Budget Cuts

 According to a National Association for Business Economics (NABE) survey, the combination of increased taxes and across-the-board budget cuts has had a minimal effect on American businesses and the economy during Q1 2013. The vast majority of respondents (93 percent) reported that the recent budget tightening had no effect on first-quarter employment and 95 percent said the political developments had no impact on capital spending. NABE suggests that the response could be the partial result of pre-sequester planning during Q4 2012 resulting in hiring and spending adjustments that mitigated some of the effects of the eventual tax hikes and budget cuts.

Key results gleaned from the survey include:

• 55 percent of respondents reported improved sales, up from Q4 2012 but down slightly from one year ago.

• 29 percent reported rising profit margins, up slightly from Q4 2012 but down from 40 percent during Q1 2012.

• 31 percent reported rising wages and salaries, also up from Q4 2012 but down over the year.

Despite quarterly improvements, just 22 percent of respondents reported actually adding jobs, down from 25 percent in Q4 2012 and 28 percent one year ago. About 65 percent of surveyed NABE economists expect the economy to grow at an annual rate of 2 percent, up from 50 percent in Q4 2012 but down from 78 percent one year ago. The industry most concerned with additional spending cuts was the services industry while the finance industry and goods producer were most concerned by global economic conditions.