US biz optimism dips but stays above global average in June: Survey

The moderation in expectations was led by the manufacturing sector. The net balance in this industry fell to its lowest since October 2022, at 26 per cent, down from 39 per cent recorded earlier in the year.

Where firms identified opportunities for growth, these were largely focused on efforts to attract and retain customers, with many citing investment in marketing and client liaison work. Companies also noted planned expansions into new markets and the release of new product lines. At the same time, firms hopes that inflation will moderate and help to alleviate pressure on client budgets, as per S&P Global’s survey.

Nonetheless, companies noted that threats to future output remain. Fears of a possible recession and persistent inflation, alongside higher interest rates, were often highlighted by firms, as uncertainty is expected to exacerbate the strain on customer spending. Meanwhile, panellists continued to mention difficulties finding suitable staff for vacancies which has hampered efforts to expand capacity.

June data indicated that US companies expect further increases in both staff and non-staff costs over the coming year. Although the lowest for two years, the net balance of firms anticipating greater staff costs was historically elevated and exceeded that seen for non-staff costs (41 per cent versus 24 per cent). Manufacturers revised down their expectations notably from February.

The net balance of companies that foresee greater non-staff costs, despite being above the series average, dropped to the lowest since October 2020 (24 per cent).

Meanwhile, firms plan to raise their output charges over the coming year. The net balance of companies predicting higher selling prices fell for the fourth successive survey period, however, and was the lowest since February 2021 (30 per cent).

Manufacturers continue to forecast greater employment over the next 12 months, despite expectations weakening since February. The net balance of companies that foresee job creation dipped from 20 per cent to 15 per cent. Goods producers’ hiring plans were unchanged from February.

June data signalled upbeat expectations regarding capex (capital expenditure) for the coming year, but forecasts for research and development spending turned negative. The net balance of firms anticipating greater research and development spending was in negative territory for the second time in the last three survey periods.

Companies remained confident that profitability will improve over the coming year. The net balance of firms expecting greater profits slipped, however, from February's one-year high of 22 per cent to 18 per cent in June and was below the long-run series average. Nonetheless, the net balance compared favourably with the global average of 14 per cent. Only companies in Russia, Brazil and Ireland registered stronger predictions for profitability.

ALCHEMPro News Desk (DP)