Survey: Economy to grow at slower pace

[October 25, 2010]  NEW YORK (AP) -- The U.S. economy should continue to grow this year, though forecasters have lowered their expectations about the pace of recovery, according to a new survey.

The National Association for Business Economics survey, set to be released Monday, found that economists have become more cautious in the third quarter, with 54 percent expecting growth of more than 2 percent in 2010, down from 67 percent in a similar survey last quarter. Still, those in the survey saw improvement in a number of areas.

"The U.S. recovery from the Great Recession continues, with business conditions improving," said William Strauss, an economist and adviser at the Federal Reserve Bank of Chicago who helped conduct analysis for the report.

Demand and profit margins continued to grow in the quarter. The survey showed better margins for the services, goods-producing, finance, insurance and real estate businesses. Margins stagnated in the transportation, utilities, information and communications industries.

The employment outlook also seemed to be improving. The portion of firms expecting a drop in employment through attrition or layoffs fell in the quarter. But most weren't expecting to add lots of workers either. The majority of those surveyed said employment would hold at current levels.

Strauss called the responses on employment "the best reading this year."

"Outside of skilled labor, no significant amount of shortages was reported," he added.

Capital spending was on the rise, and further business investment was expected to continue to boost the economy during the next 12 months, according to the survey. Companies are expected to focus spending increases on technical items like computers and communications equipment.

However, higher costs of materials and labor continued to pose a problem, and firms said they had difficulty passing those costs on to consumers. A majority of those surveyed also expected government regulations and federal taxes to hurt company performance next year.

Prices are expected to rise, with less than a tenth of those surveyed planning to cut prices in the final three months of the year.

The survey compiles survey responses from 74 association members between Sept. 21 and Oct. 6.

[Associated Press; By CHRIS KAHN]

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