Washington (AFP) – Record increases in wages and materials costs are eating into corporate profits despite robust sales, according to a survey of business economists released Monday.
The survey by the National Association for Business Economics also found companies had not changed hiring plans following either December’s sweeping tax cuts or President Donald Trump’s new tariffs on steel and aluminum.
Economists are pointing to a pickup in inflation this year after a years of weak price pressures, and the Federal Reserve poised to raise interest rates as many as three more times in 2018 — a prospect which has investors on edge.
The index for wages and salaries in the first three months of the year posted the biggest increase “since NABE began tracking the data in April 1982 and the largest share of respondents reporting shortages of skilled labor in nearly 10 years,” Sara Rutledge, chair of the quarterly survey, said in a statement.
While sales continued to grow and profit margins remained healthy, the survey results suggested “profit margins slowed” in the first quarter of 2018 as a result of mounting price pressures, she said.
Meanwhile, they survey of more than 100 respondents from industry and trade associations found 65 percent said they had not changed hiring plans as a result of December’s tax cuts — a principal selling point for the fiscal overhaul, which were adopted amid partisan rancor among lawmakers.
Furthermore, 68 percent said the steep tariffs President Donald Trump had imposed on steel and aluminum imports in March had also not caused them to change hiring plans.
Still, the survey’s materials cost index jumped to 50 from 44, its highest level in seven years.
But the survey found easing anxieties about the possibility that current efforts to renegotiate the North American Free Trade Agreement could fail — with 62 percent answering “don’t know/not applicable,” when asked for the most important issue in the talks.