Survey: Companies Upbeat About 2nd Quarter Profits

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Survey: Companies Upbeat About 2nd Quarter Profits
Washington, DC, July 7--A higher percentage of U.S. companies saw profit margins widen last quarter, making businesses ``upbeat'' about the rest of the year, according to a survey by the National Association for Business Economics. Forty-one percent of the 104 companies responding said they plan to increase hiring in the next six months, up from 34 percent in April, the quarterly survey found. In addition, 61 percent expect to boost capital spending during the next year, up from 53 percent in the previous survey released in April. ``It doesn't look like we're at a point where we have to worry about anything that might derail the economic recovery,'' said Duncan Meldrum, chief economist of Air Products & Chemicals Inc. in Allentown, Pennsylvania, and president of the economics group that conducted the survey. More than a third of companies in the survey, 37 percent, said profit margins widened in the second quarter, the highest percentage since the fourth quarter of 1987. Productivity gains helped companies counter higher material costs. Profits at companies in the Standard & Poor's 500 Index probably rose an average 19 percent last quarter, Thomson Financial estimated. The survey ``shows a modestly more upbeat view'' of the year, the association said. Forty-three percent said they were more optimistic about the rest of 2004 than they were three months ago, 54 percent had not changed their economic outlooks, and 3 percent are more pessimistic. The results ``suggest any apparent weakness in the monthly data for retail sales and jobs is probably temporary,'' Meldrum said. More than half of the officials responding to the survey anticipate material costs will rise over the next three months, the association said. Companies are coping with escalating costs by simply absorbing them into their bottom lines, raising prices to consumers, or searching for alternatives such as contracting out jobs, said James Meil, chief economist at Eaton Corp. in Cleveland, who helped analyze the survey results. ``Inflation is a concern,'' Meil said. ``What comes across pretty clearly in the survey is the substantial difference from the beginning of the year in the way inflation is weaving its way through businesses.'' The U.S. economy is forecast to expand at a rate of about 4 percent through year's end, NABE said. Some companies are expanding to meet the demand.