The outlook for the U.S. economy has significantly deteriorated since July, judging by the results of the latest quarterly business conditions survey from the National Association of Business Economics.

In the poll of 101 NABE member business economists, 69% of the panelists said they expected real gross domestic product growth of just 1.1% to 2.0% over the subsequent 12 months. Only one in five expected growth of 2.1% to 3.0%.

By comparison, just three months earlier, nearly half (48%) of respondents to the previous survey following the second quarter expected real GDP growth to exceed 2.0% for the next 12 months.

Constance Hunter

“The U.S. economy appears to be slowing, and respondents expect still slower growth over the next 12 months,” said NABE president Constance Hunter, who is also the chief economist for KPMG. “Many of the survey indicators are at their lowest level in several years.”

She added, “After more than a year since the U.S. first imposed new tariffs on its trading partners, higher tariffs are disrupting business conditions, especially in the goods-producing sector.” Two-thirds of respondents from that sector indicated that tariffs have had negative impacts on their companies’ business conditions.

Other economic indicators were similarly troubling. NABE’s Net Rising Index (NRI) for sales — the percentage of panelists reporting rising sales minus the percentage reporting falling sales — sank for the second consecutive quarter. The index fell to 22, down from 37 in the association’s first-quarter survey.

Where a higher NRI is a positive result for sales, the opposite is true for cost factors.

For example, materials costs rose for a 14th consecutive quarter, registering an NRI of 25. Such increases were reported most from the transportation, utilities, information, and communications (TUIC) sector; half of those respondents expected materials costs to rise further in this year’s fourth quarter, resulting in a forward-looking NRI of 50.

But among all the less-than-stellar economic indicators, the most startling and unsettling may be a massive plunge in hiring in the third quarter, considering the job market’s outsized impact on the economy.

Among the 101 business economists surveyed in October, only 20% said their companies hired more people during the quarter. Just three months earlier, 34% said they were hiring.

Recruiting and management consulting firm Korn Ferry called it a “head-turning” result.

Trends can change, of course, but so far this particular trend has been observed across most industries, Korn Ferry said. “The fundamentals of the U.S. economy remain relatively strong, but we are seeing most organizations taking a more conservative view around costs near-term,” said Scott Macfarlane, a senior client partner at the firm and the global account lead in its financial services practice.

According to Macfarlane, the impact of geopolitical turmoil and trade tension in the manufacturing sector is spilling over into the entire economy.

“As a result, organizations are looking at how to improve operating margins by capitalizing on still-robust consumer demand while increasing their cost base,” he added.

At the same time, however, 82% of respondents to the NABE survey said they are having difficulty staffing high-skill positions.

“People costs are always a major factor, but talent that can help advance digital strategy is still very valuable in great demand,” said David Ferris, a Korn Ferry senior client partner specializing in technology.

Photo of Constance Hunter by Sean Zanni/Patrick McMullan via Getty Images

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