Executives Unfazed by Economy, Iraq, Terror
By SHERRI CRUZ
Orange County executives aren’t fretting about tepid job growth, slower consumer spending and signs of trouble at local technology companies.
Optimism among executives for a strong third quarter is at a fever pitch, according to the Orange County Business Expectations Index, done by California State University, Fullerton, with the Business Journal.
The index of expectations stood at 94.9 for the third quarter, up from 88.1 for the second quarter.
The reading is the highest yet in the 11-quarter-old survey, topping the 91.5 reading for the first quarter. Any number higher than 50 reflects optimism in the regional economy.
“Orange County seems to be recovering quicker than the national economy,” said Anil Puri, dean of the College of Business and Economics at Cal State Fullerton and director of the survey.
That would be a switch from past recoveries, when OC lagged the rest of the nation, he said.
The number of large employers responding to the survey was up from the prior quarter, according to Puri. Nearly 44% of the respondents had more than 100 workers. More than a quarter had fewer than 20 workers. The survey was done during the week of June 28 to July 2. Of the 860 companies contacted, 87 responded.
One note of caution: Executives aren’t so confident that they’re stockpiling inventory or doing a lot of investing in equipment, Puri said.
Most respondents,66%,said they don’t expect to change their inventory or equipment spending. Nearly 31% expect to up inventory and equipment spending while 3.1% expect a decrease.
But executives still are vastly confident about the economy.
The percent of executives who said business would improve or stay the same in the current quarter rose to 98%, up from 92% in the prior quarter. A majority of executives said they expect higher sales and profits and plan to hire more workers.
The optimism reflected in the survey cut across large and small businesses and various sectors.
“We’ve seen numerous clients in the planning stages for Orange County projects in the second quarter that will move forward in the third quarter,” said Tom Sauchelli, vice president of the Lake Forest office of Long Beach-based Farmers & Merchants Bank.
The bank plans to open branches in Huntington Beach and Laguna Hills Mall during the third quarter, Sauchelli said.
Even OC’s hotel sector,among the hardest hit in the past few years,is looking up, according to Deborah Emerick, director of sales and marketing for Doubletree Hotel Santa Ana/Orange County Airport (photo).
“The economy is always a concern in the hotel industry,” she said. “However, the trend this year, so far, has been very promising.”
Doubletree isn’t planning any significant hiring this quarter, Emerick said.
Tom Gast, senior vice president of real estate for Compton-based Ralphs Grocery Co. calls the third quarter “one of a strong recovery.”
Ralphs, part of Cincinnati-based Kroger Co., still is getting over a five-month strike that ended in March. The past quarter’s sales exceeded expectations and profits were “healthy,” Gast said.
“That was encouraging,” he said.
Kroger plans to open 10 to 12 new Ralphs and Food 4 Less stores this year, including a few in OC, he said. Earlier this year, Kroger closed 15 Ralphs stores in the region, including ones in Anaheim Hills, Brea and Westminster.
Not everyone is as bullish.
Craig Gordon, national director of business development for stock brokerage RBD Dain Correspondence Services in Newport Beach, said he is seeing a seasonal softening.
“As we approach the summer, we are watching business slow down a little bit,” he said.
Executives have other worries.
Helane Cohen, owner of Le Petit Cookery Inc. in Irvine, said she is concerned about the November presidential election.
“The economy seems to be improving, but how will the next president, or the current, affect it going forward?” she said.
Workers’ compensation insurance rates, Iraq and terrorism also are on Cohen’s radar, she said.
Even with workers’ compensation reform this year, the issue still weighs heavy on OC businesses.
“Workers’ comp will continue to be a thorn in the side of businesses and a check that I am not fond of writing,” said Rick Turner of Pac-West MicroElectronics LLC, an Irvine electronics supplier. “But I’m confident in the economy.”
Turner said he plans to expand his offices and hire a few more people this quarter.
Iraq is mostly a national, not a local, economic issue, executives said. Nearly 58% of respondents said the conflict has hurt U.S. business, while 48.5% said the war hasn’t had a negative impact on their businesses.
The turmoil doesn’t directly affect Ralphs, Gast said. But if the economy suffers because of Iraq, then it could hurt business, he said.
The fighting in Iraq could be a concern if it drags on until the holidays, said Todd Rachal, branch manager for Wells Fargo & Co. in Irvine. The third quarter usually is the best, he said.
James Bear, managing partner at Irvine-based Knobbe, Martens, Olson & Bear LLP, said he is optimistic about the quarter and expects to hire more attorneys.
Another terrorist attack or major event is his main worry, Bear said. That would disrupt his clients’ businesses, he said.
“The biggest concern would be an unwanted event that could send us back toward the Sept. 11 economy,” said Ted Holmquist, general manager for the Hilton Irvine/Orange County Airport.
Barring another attack, “we anticipate the third quarter to be equally as good as the second,” Holmquist said.
