Business expectations of Orange County chief executives, business owners and managers retreated some for the third quarter after two quarters of rising optimism.
Even so, they remain strongly optimistic about their businesses and the economy, according to California State University, Fullerton’s quarterly OC business expectations survey.
The survey’s sentiment index is at 81.7 for the third quarter. A reading above 50 indicates executives expect growth in the coming quarter.
Sentiment has tempered a bit from the second quarter, when the index was at 88.7. It hit a high of 94.9 two years ago. The survey’s recent low point came after last year’s hurricanes, when it hit 75.9.
Falling stock prices and steadily rising interest rates are a factor, according to Anil Puri, dean of the College of Business and Economics at Cal State Fullerton.
“Businesspeople are concerned about the state of the economy and they are being cautious,” he said. “They are planning to reduce inventories and possibly reduce their work forces. At least they are thinking about it.”
Roughly 44% of survey respondents ranked the overall economy,factoring in interest rates and Wall Street’s slump,as their main concern, up from 37% a year ago.
Sixty percent of respondents said their companies expect to hold steady investments in inventory and equipment during the third quarter, in line with the past quarter. Nearly 30% see a rise. Twelve percent expect a decline, up from 7% in the second quarter.
Some see the rising cost of labor moderating in the quarter. Roughly 55% of respondents expect salaries and other labor costs to rise in the third quarter, down from 60% in the second quarter.
Thirty-eight percent expect no change in labor costs, up from 33% in the previous quarter. Just 6% see labor costs falling in the quarter.
About 54% of the executives polled expect no change in employment in the third quarter, down from 59% a quarter earlier. Roughly 9% plan to cut jobs, up from 4% last quarter and 7% a quarter earlier.
For more on this story, see the July 10 edition of the Business Journal.
