Survey suggests businesses feeling pinch of higher costs

NEW YORK — Rising costs for materials and labor appear to be pressuring businesses, a quarterly survey from the National Association of Business Economics suggests.

During the first quarter, 31 percent of businesses surveyed reported higher material costs, more than double the 15 percent that saw costs rise in the previous survey. Also, 35 percent reported rising wages and salaries at their businesses in the past three months, up from 23 percent in January.

Yet those who said they raised the prices they charge in the past three months remained unchanged at 20 percent, according to the latest association survey of 72 members, which was conducted March 18 to April 1.

“It appears that businesses were not able to pass on costs increases, resulting in increased pressure on margins,” the survey findings said.

The association’s quarterly survey aims to gauge business conditions at members’ firms or industries. The April survey reflects first quarter results and the near-term outlook.

Despite the cost pressures, businesses seem more upbeat about the broader economy’s direction. Eighty percent of surveyed businesses said they expect the GDP to rise at least 2 percent over the next year. Nearly three-quarters also said they expect labor market conditions to improve, with unemployment easing to 5 percent to 6 percent in the next one to three years. And over the next six months, 43 percent of respondents expect their firms to expand employment.

Still, a majority expect wage growth to remain subdued, with growth of up to 3 percent over the next three years.

The number of businesses reporting rising sales in the first quarter fell to 53 percent from 63 percent in the previous quarter. In a statement, association President Jack Kleinhenz, who is also chief economist at the National Retail Federation, attributed the decline to “a very rough winter.”

Capital spending rose for 38 percent of respondents, up from 28 percent in January. Meanwhile, those reporting rising profit margins during the period declined to 32 percent from 34 percent in the previous survey.

Looking ahead to the coming quarter, 41 percent of pollees said they expect costs to increase up to 5 percent. Whether they’ll be able to pass that on to customers is uncertain; 31 percent said they expect their businesses to raise prices.

That’s down from the 43 percent who said they planned to raise prices in January, but still a higher level than most of last year.