Falling oil prices help boost optimism of business economists

Shoppers are reflected in a store's window as they walk through downtown Chicago on Dec. 24, 2014

Jan. 26, 2015 8:37 AM PT

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Reporting from Washington — Plunging oil prices helped boost optimism about first-quarter growth among economists at U.S. businesses, who had higher expectations for sales, hiring and wages than they did three months ago, according to survey results released Monday.

About 66% of respondents in the quarterly survey by the National Assn. for Business Economics predicted that the economy would expand between 2.1% and 3% this year. That compared with 57% in October.

“There are strong expectations for the first quarter, especially for jobs and wages, backed up by strong capital spending,” said John Silvia, chief economist at Wells Fargo Securities and the group’s president.

The sharp decline in oil prices was the most significant economic shock last year for many companies. A majority -- 57% -- said the price drop would be positive for their businesses. About 18% said it could have negative effects.

The economists reported a big jump in capital spending at their firms, with 51% saying it increased in the fourth quarter. That compared with 34% in the third quarter.

Sales and hiring reportedly improved slightly in the fourth quarter, but wage growth was more significant.

About 31% of respondents said wages and salaries had increased at their firms, compared with 24% in October. However, the figure was down from the first half of 2014.

Still, the economists’ forecasts call for wage growth to pick up in the first quarter. About 51% of respondents said they expected wages to rise over the next three months, compared with 34% in the October survey.

Wages and hiring are expected to pick up despite downward pressure on prices. Just 16% of respondents said their firms raised prices over the last three months, compared with 25% in October.

Expectations for prices in the next three months stayed about the same as they stood in October, with 28% of respondents forecasting their firms would raise prices.

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