Business Optimism Soars in First-Quarter Outlook
By SHERRI CRUZ
Orange County executives say they’re expecting a strong start to the New Year with projections of higher first-quarter sales and profits, according to the Orange County Business Expectations Index.
Some say they even may do something they haven’t done in a while: hire more workers.
The index, designed to reflect the overall mood of executives, hit its highest mark this quarter since the survey began in early 2002. It jumped to 91.5 from 84.1 in the fourth quarter and 76.6 in the third quarter. Any number higher than 50 reflects expected expansion in the regional economy.
The index is based on a survey of local executives done by California State University, Fullerton in association with the Business Journal.
“The important thing is the trend,” said Anil Puri, dean of the College of Business and Economics at Cal State Fullerton and director of the survey.
About 15% of 735 businesses contacted during the week before Christmas responded to the survey.
About a quarter, 26%, had yearly sales of more than $50 million, while 65% had revenue of less than $20 million.
On the sales front, 66% of responding executives said they expect their revenue to rise in the first quarter, compared to 61% in the fourth quarter.
Profits are seen rising, too, according to the survey.
More than two-thirds of respondents, 67%, said they expect higher first-quarter profits, compared to 53% in the fourth quarter. Nearly a quarter, 24%, said they expect no change. Eight percent said they expect lower profits.
The expected pickup in sales and profits isn’t entirely surprising given the economic recovery nationally and in OC. More telling may be the outlook on hiring, which has lagged the comeback in sales and profits.
About 39% of respondents said they plan to hire in the first quarter. The figure is up from 31% in the fourth quarter. This marks the third straight quarter of anticipated hiring.
In terms of general business activity, respondents were bullish. About 93%,even with the fourth quarter,said they’re expecting stepped up business activity.
Richard Chang, of Irvine-based Richard Chang Associates Inc., said referrals and calls to his management consulting business have been steadily increasing since the latter part of 2003. His clients include Hasbro Inc. and Vivendi Universal Entertain-ment’s Universal Studios.
One of the challenges for companies this year is re-energizing workers after the downturn, Chang said.
Business leaders still have concerns, with the national economy being the biggest. But they’re not as worried as they were in the fourth quarter. More than half, 52%, cited the national economy as a big problem, down from 78% midway through 2003.
Government regulations surpassed labor costs as the second biggest issue affecting businesses in the latest survey.
“The business environment has become less and less friendly,” said Peter Stephan, chief executive of Pension Group Inc., an Irvine company that develops retirement plans for employers.
Workers’ compensation is as big a problem as ever, he said, even for his business, which is clerical in nature.
“Our claims are miniscule,” Stephan said.
Even so, he said Pension Group’s premiums still have risen.
“We’re tainted by being in business,” Stephan said.
But Stephan said he’s hopeful for a turnaround this year.
In response to a one-time question about the impact of Gov. Arnold Schwarzenegger’s $15 billion bond plan to balance the state budget, 54.5% said they thought it was a good deal. Nearly a quarter, 23%, thought it would make no difference. An equal number said it is a bad idea.
Even with a new reform-minded governor in Sacramento, a fraction of respondents, 5.5%, said they are looking at expanding outside California, up from 4.8% in the fourth quarter. The bulk of the respondents said they plan to keep their businesses here.
