Orange County executives remain highly optimistic about the local economy going into the first quarter despite some national concerns.
That’s according to the quarterly Orange County Business Expectations Index, done by California State University, Fullerton, for the Business Journal.
The index measures executives’ outlook and stood at 89.7 for the first quarter. The reading shows executives still are upbeat,any number higher than 50 reflects optimism in the regional economy.
The reading is down slightly for the second straight quarter from a survey high of 94.9 back in July for the third quarter. The index stood at 90.7 for the fourth quarter.
The changes, while trivial, could signal concern among local executives about the national economy, according to Anil Puri, dean of the College of Business and Economics at Cal State Fullerton.
The war in Iraq, the prospect of higher interest rates and the weak dollar all could be factors, Puri said.
Otherwise, he said, executives see the local economy in a positive light.
The bulk of executives surveyed said they expect an increase in sales and profits in the first quarter from the prior quarter.
Three-fourths said they expect sales to rise, up from 67% the prior quarter. As for profits, 64% said they expect them to come in higher than in the fourth quarter.
The survey was done mid-December. Of the 905 businesses contacted, 135 responded. The majority of the respondents were executives at companies with 100 or more workers.
About 45% of respondents said the national economy was the most significant issue for the quarter, same as in the fourth quarter.
About 42% of respondents said they expect to hire in the current quarter, up from 36% in the prior quarter. Nearly 49% said they planned no workforce changes. About 10% said they plan to cut jobs.
Executives also see themselves paying more for workers. About 56% predicted their labor costs will go up this quarter, up from 41% last quarter.
Healthcare insurance premiums, which continue to rise,albeit at a slower pace than in preceding years,likely are behind the projected higher labor costs, Puri said.
About a third of respondents said they don’t expect any change in labor costs this quarter.
A sizable number of executives, 41%, plan to spend more on inventory and equipment in the quarter. Nearly 50% said they planned to make no new investments, while 10% said they expect to cut spending.
In the survey’s worst quarter, the second quarter of 2003, about 22% of respondents said they expected to up spending on inventory and equipment.
In that same quarter, just after the U.S. invasion of Iraq, the sentiment index reached a low of 31.6.
The index bounced back the following two quarters and then hit 91.5 for the first quarter of 2004.
By the third quarter of last year, executives appeared to have grown used to the Iraq war and helped push the index to a high of nearly 95. y
