The economic outlook of local executives is up for the second straight quarter, according to a survey from California State University, Fullerton.
The survey’s index reading of 30.8 for the third quarter is the highest it’s been in more than a year.
The index, which attempts to measure business expectations for the coming quarter, hit a low of 15.2 at the start of the first quarter as the financial crisis and recession rattled business owners, managers and chief executives.
The 22.7 reading at the start of the second quarter marked a subtle uptick after the index hovered in the high teens for the three prior quarters.
Back-to-back quarters of improving sentiment makes it less likely that the second quarter’s gain was a fluke, according to Anil Puri, dean of the Mihaylo College of Business and Economics at Cal State Fullerton.
The index, seen as a leading indicator for business activity, is prone to random bounces, Puri said.
“There’s more evidence that people feel things are getting better,” he said. “It doesn’t mean we throw all caution to the wind.”
Respondents still remain pessimistic overall. A reading of less than 50 indicates expectations of a shrinking economy, which is what people have been predicting since the third quarter of 2007.
About 70% of the respondents said their biggest concern was the state of the overall economy. Government regulation and the availability of credit tied as the second biggest concerns.
A little more than half, 59%, said they expect overall business activity to improve or stay the same.
This was the highest reading since the second quarter of 2008, and it was up from 43% for the recently ended quarter.
Faith in the economy appears to be stronger than what people expect from their own industries as only 21% said they expect to see growth, down from 30% at the start of the second quarter.
About a third are bracing for their industries to weaken, down from 43% for the second quarter. Forty-five percent said things would be stable, up from about 25%.
Employment could be stabilizing at the businesses of respondents.
More than 60% said they’ll make no change in employment in the third quarter, up from 41% for the second.
About 28% said they would cut jobs, down from 37% for the second quarter.
Hiring remains a remote possibility as only 11% said they would add more workers, though that was down from 22% for the second quarter.
“Employers are being very cautious in simply holding on to their current labor force,” Puri said.
Ralph Rodheim of Rodheim Marketing Group in Costa Mesa said he’s recently hired three people after landing two clients.
“It’s a wonderful indication when people are adding marketing,” said Rodheim, who took part in the survey.
Inventory expectations are steady.
Most respondents, or nearly 65%, said they expect to hold pat on the amount of goods they stock, which is about the same number reported three months earlier. Almost 21% said they would cut back, down from nearly 29% for the second quarter.
“It shows that people aren’t ready to act yet,” Puri said.
About 15% said they would add inventory in the hopes of higher sales. This is double what respondents said for the second quarter.
The survey showed only a slight improvement in sales expectations.
Nearly 39% said they would see a decrease, down from about 44% for the second quarter.
About 30% said they’d see an increase, about the same as for the second quarter. About 30% expect to see little change, the same as three months earlier.
Expectations for profits were little changed, with almost a quarter of respondents looking for an increase, compared to about 27% for the second quarter.
About 37% expect to see no change in profitability, down from about 26%. And about 38% project fewer profits, down from about 46%.
About a third of respondents said they thought the local economy was doing better than the national economy, which is about the same for the second quarter.
Nearly 30% said it was doing worse than nationally, up from 21%. And the number who thought the two are about even held steady at about 40%.
Puri said he’s looking for the economy to continue improving at a slow pace.
“We’re not expecting to see any big jump,” he said.
