Profit expectations fall at US companies, NABE says

Dive Brief:

  • Expectations for second-quarter profit margins at U.S. companies sagged as wages and the cost of materials surged, according to a survey by the National Association for Business Economics (NABE). The percentage of survey respondents who expect profits to rise in the next three months fell to 22% in April from 29% in January.
  • “Cost pressures are starting to impact profitability,” according to Jan Hogrefe, chief economist at Boeing and chair of the NABE Business Conditions Survey. NABE panelists have not expressed such a dim view of profits since the height of the pandemic in October 2020.
  • Inflation was identified as the top risk by the largest share of panelists (37%), with three out of four respondents reporting rising materials costs and seven out of 10 saying they raised wages during the first quarter — the highest share in a data series that goes back 40 years.

Dive Insight:

CFOs concerned about the harm to profits from the biggest surge in price pressures in four decades need to also track the risk that an aggressive inflation-fighting campaign by the Federal Reserve may tip the economy into a recession.

Fed Chair Jerome Powell on Thursday indicated that policymakers will likely push up the federal funds rate by a half point at the end of a two-day meeting on May 4. It would be the first increase in the benchmark rate of that size since 2000.

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