Business economists gloom on economy rising

WASHINGTON (Reuters) - Business economists are turning pessimistic about the U.S. outlook and increasingly fear economy will slip into a recession in coming months.

The National Association for Business Economics said on Monday that the 109 members who responded to its quarterly survey between March 24 and April 8 were "notably downbeat" about their first-quarter experience and about near-term prospects.

"For the first time in five years, reports of falling profit margins outnumbered reports of rising margins in the first quarter of 2008, while demand at respondents' firms grew more weakly than at any time since the recession of 2001," said Ken Simonson, chief economist for Associated General Contractors of America.

About 30 percent of respondents expected gross domestic product, the broadest measure of national economic activity, to decline in the first half of 2008 and most others thought growth will be below an annual rate of 1 percent.

By contrast, only 10 percent expected the economy to contract in the first half when they were surveyed in January.

A recession is typically defined as two consecutive quarters in which GDP declines. The last U.S. recession ran from March to November 2001.

NABE said the steep drop in goods and services demand its members reported in the first quarter "is consistent with other evidence that the U.S. economy is slowing and may be in recession."

The Bush administration has steadfastly refused to speculate whether a recession has begun, although Treasury Secretary Henry Paulson concedes the economy "has turned down sharply." President George W. Bush said on Friday the White House foresaw a downturn last fall and acted to put a stimulus program in place to counter it.

None of it was making businessmen happy.

"Seventy percent say they are more pessimistic than three months ago," NABE said.

Among other concerns, 66 percent of respondents said they paid more for materials in the first quarter this year, which NABE said was the highest share since 2004. They blamed weakening markets and soaring commodity prices for squeezing profit margins.

More were suffering from tight credit conditions.

"Thirty-none percent of respondents stated that tightening credit conditions have negatively affected their business, up from 26 percent in January," NABE said.

Employers were cautious about hiring, with 34 percent saying they will add jobs over the next six months and 23 percent planning to cut staff.

There were signs that a slowing economy was making it harder for companies to boost prices. NABE said 34 percent of respondents said they expect to boost prices in coming months compared with 47 percent who planned to do so in January.

(Reporting by Glenn Somerville; Editing by Neil Stempleman)