Stock Market Losses Ding Expectations
By RAJIV VYAS
The stock market’s wretched showing of late has turned Orange County’s business leaders more pessimistic for the third quarter, according to a California State University, Fullerton, survey done with the Business Journal.
The survey asked small and large business leaders about expectations for sales, staffing and profits in the third quarter.
Fifty of the 104 respondents said they expect their sales to rise somewhat, while six expect a significant increase. Thirty-two said revenue would remain stable, and 16 businesses said they would see a decrease in their sales somewhat.
Last quarter, two-thirds of respondents,69 out of 109 business owners and executives,said they expected a rise in sales for the June quarter. Eight people said their sales likely would increase “significantly” in the quarter, while 26 said revenue would remain stable.
“The stock market is obviously creating jitters among business owners,” said Anil Puri, director of the Cal State Fullerton Orange County Business Expectation Survey. “The fall in the stock market is affecting business sentiment despite the fact that economic data continues to be positive.”
Puri said manufacturing data is improving across the nation, employment is stable and inflation continues to be low.
The survey, the third in an ongoing series, was done in late June.
Third-quarter operating profit is expected to increase significantly for 6% of the companies, while 43% said profit would rise somewhat. Fifty-one percent said profit would be stable or decrease slightly.
Earlier this year, 10% of the respondents said profit would increase significantly in the June quarter, while 52% said profit would rise somewhat. Thirty-eight percent said profit would be stable or decline somewhat.
Puri said the economic comeback in the first half of the year was aided by companies restocking their inventories, which were depleted in the last two quarters of 2001.
“That adjustment has already taken place,going forward production will only increase depending on demand from consumers and businesses,” Puri said.
Businesses don’t expect much change in their workforces.
Twenty-three percent of companies said they expect to increase workers somewhat while 57% said their staffs would be stable. Sixteen percent expected to make some cuts.
Executives from 11 industry sectors participated in the survey. Fourteen respondents were from financial services and a similar number were from real estate; 23 were from business services and 10 from manufacturing.
More than 60% of the responding businesses had yearly revenue of more than $5 million.
Twenty-one respondents employed more than 1,000 workers while 25 had between 100 to 1,000 workers.
More than 60% of the respondents said that their biggest concern was the health of the overall economy.
Thirty-five percent of respondents expect their industry to improve and 32% project a better economy in the third quarter.
“In Orange County the situation may not be as bad as it is nationally,” Puri said. “Although their own businesses have firmed up somewhat, their perception of the overall economy has worsened because of stock market losses. It seems to me that there is some deterioration in expectations.”
