Executives and business owners continue to hold low expectations for the first quarter, according to a business sentiment survey by California State University, Fullerton.
An index based on the survey is at 15.2 for the new quarter, the lowest in its eight-year history. A reading below 50 indicates expectations of a declining economy.
The index is little changed from the past two quarters. It came in at 17.8 for the fourth quarter and 18.1 for the third.
The trend “doesn’t suggest a temporary or quick turnaround,” said Anil Puri, dean of the Mihaylo College of Business and Economics at Cal State Fullerton. “The feeling is that this is a long-term problem.”
The index reflects the opinions of local business owners, chief executives and managers about the economy and their own businesses.
Sentiment has fallen nearly every quarter since the index produced an 83.1 reading for the first quarter of 2007. It saw a brief uptick for the second quarter of last year.
The overall economy was cited by 71% of respondents as their biggest concern.
About 15% said the availability of credit was most important. Two percent cited government regulation.
When respondents were asked about the impact of the financial crisis, nearly 40% said they considered it severe. That was up from nearly 30% for the fourth quarter.
About half believe the crisis to be significant. Less than 10% said it has had little effect.
Feelings that the crisis directly would impact executives’ own businesses worsened, with more than 16% saying it would have a severe impact compared to 8% for the fourth quarter.
About half said the crisis would have a significant impact on their businesses, up from 34% three months ago. Forty percent expect only a moderate effect, down from nearly 60% last quarter.
Nearly a quarter of respondents said they thought overall business activity would improve or stay the same, down from nearly 40% three months ago.
Two-thirds of respondents said they expected their own industry to be slower in the first quarter, overshadowing 21% who are looking for growth and 14% anticipating things to be stable.
Expectations for employment deteriorated for the fourth straight quarter as nearly 40% expect to cut jobs, compared to 21% last quarter.
About half said they would make no job changes, down from 58% for the fourth quarter. Eleven percent plan to hire, down from 21% three months ago.
Sales expectations also dropped off sharply, with more than half of respondents preparing for decreases, up from 28% for the fourth quarter.
About 20% said they’re looking for an increase in sales, down from 35% last quarter. About a quarter expect them to be flat, down from 38% three months ago.
More than half are bracing for fewer profits, up from 36% for the fourth quarter.
Almost a quarter believe they’ll see higher profits in the next three months, down from about a third for the fourth quarter. And about a quarter expect no change, compared to 31% last quarter.
Businesses are becoming more conservative with their inventories with only 7% saying they’d increase them compared to nearly 20% last quarter.
