Orange County executives expect the regional expansion to keep on trucking in the fourth quarter, according to California State University-Fullerton’s Orange County Business Expectations Survey.
But while execs pushed the optimism needle into the red just three months ago when the composite index touched an all-time high of 98.1, they backed off a bit on all measures this time, enough to drop the index slightly to 96.2.
The survey measuring hiring, sales, purchasing, capital investment and profit forecasts of local business owners and senior executives spoke to more modest growth just last year, 88.2 for the fourth quarter, but grew more giddy through the first three quarters this year: readings of 95.2, 94.4 and that Q3 record of 98.1.
Even with a mini drop-off in Q4, the 2018 surveys amount to the highest sustained readings of the expectations gauge since Project Director Anil Puri of the Woods Center for Economic Analysis and Forecasting has been canvassing industry leaders small to large.
The Woods Center is part of CSUF’s Mihaylo College of Business and Economics.
“Overall slight moderation but just slight,” Puri said.
Forecasted investment in inventory and equipment showed the biggest gain, 34% to 45%, boosted by depreciation features in the 2017 Tax Cuts and Jobs Act. “That’s probably what it is,” Puri said.
“Clients’ confidence level is way up,” Accounting Partner Vic Hausmaninger said. “The biggest reasons, a strong national economy and the positive impact of the tax cuts.”
Hausmaninger co-founded Irvine-based HBLA CPAs Inc. 34 years ago. The tax-and-audit heavy practice ranked No. 36 in our July tally of local firms with 21 accountants, and HBLA’s looking to add more staff as its strong base of logistics and manufacturing firms ramp up activity.
“The deductions, lower taxes allows [his clients] to do some more investing…build more inventory…those are all good things.”
The overall OCBX Index fell just two points and most of the components were off by similar amounts; sales and profit forecasts and predicted growth in their respective industries.
Marketing executive George Bloomfield has spent decades helping young companies develop branding strategies and accelerate growth.
“I’m seeing very cautious enthusiasm,” Bloomfield said of his diverse client base. Still, the co-founder and president of Mission Viejo-based The Bloomfield Group says many of his clients are hiring, but with the county jobless rate just 3.2%, it’s “hard to find help today,” he said, “and they’re getting top dollar, asking for ridiculous amounts right [out] of college.”
Hausmaninger agrees. “There’s a shortage of labor…blue collar, white collar and competition results in higher wages. In accounting, supply is short and demand is high.”
All Politics Isn’t Local
The quarterly survey’s special question may be sounding the loudest alarm. In an environment of rising short-term interest rates and high housing costs, the noise from Washington emerged as “the biggest threat” to the U.S. economy, as 44% of respondents cited “political turbulence,” with tariffs (28%) and rate hikes (15%) a distant second and third (see poll results).
“Political uncertainty—people think that it doesn’t matter to business,” Puri said, “but it does. And despite that employment and other numbers are up.” China’s economic woes (0%) and the E.U.’s stagnation (1.9%) barely registered on OC execs’ threat meter.
“We have our own version of Brexit,” Puri said. “Of course weighing on all executives’ minds is the length of the expansion, a record now at 111 months.”
“I knew folks who were calling for a slowdown last year,” Bloomfield said, “hasn’t happened.”
He said the tax cuts have helped give the recovery some late life.
It’s surely been a boon to accounting firms. “We’re probably going to be up, true growth, 5%, maybe more—that’s new services, new clients,” Hausmaninger said. “With the tax changes there’s a lot of projections to be made.”
Method Used
The survey is based on responses of about 60 senior-level OC executives, a 7% response rate of the 750 or so queried Sept. 18 to 25.
Puri started conducting the survey in 2000.
