Business Survey : 3rd-Quarter Predictions Restrained

A survey of San Fernando Valley businesses released Monday predicts modest growth, flat capital spending, stiffer competition and a nearly stagnant job market in the third quarter.

The survey, the 10th conducted by the Woodland Hills office of the Price Waterhouse accounting firm, found considerably less optimism among businesses than it did last quarter. But comparisons to past quarters are difficult because previous Price Waterhouse surveys lumped the Valley area and Ventura County together. This one lists them separately.

Ventura County ‘Growth Cycle’

Price Waterhouse said its Ventura County survey shows businesses there to be optimistic about overall business conditions and in a growth cycle that may continue into the next quarter.

Rock Hankin, managing partner of the firm’s Woodland Hills office, said the survey results mirror the national economy in forecasting slower growth in the Valley, where, he said, businesses are “revising their business plans downward and tightening their belts.”

“They’re less optimistic about the future than in the past, and I think that’s highly appropriate for them,” Hankin said.

The survey also found that about three-quarters of the businesses in both areas have no plans to raise prices. Larry Scherzer, Hankin’s counterpart with Arthur Young in Woodland Hills, said the inability to raise prices is a major problem for local companies.

Price Competition

“There is a general concern about price competition,” he said. “People are scurrying around trying to lower the cost of manufacturing.”

More than half the businesses surveyed in the Valley and Ventura County reported that competition increased during the second quarter; only about 10% said it decreased.

Scherzer said he agreed with the general findings of the Price Waterhouse survey: “I think that’s a fair scenario. I don’t think anybody sees boom times ahead, but I don’t think anybody’s predicting a depression.”

Indeed, about 46% of Valley businesses foresaw improving business conditions in Southern California for the third quarter, while only 12% saw conditions worsening. In Ventura County, 70% saw business conditions improving, while 12.5% predicted deterioration.

Growth Predictions

Also, 66% of Valley businesses predicted their sales would grow up to 20% in the third quarter. In Ventura County, 80% of the businesses predicted such sales growth.

Forty-five percent of the Valley respondents predicted their capital spending would remain about the same, while about a quarter each predicted higher and lower spending. In Ventura County, 40% see higher spending, 37.5% see flat spending, and 22.5% see lower spending.

In both areas, about 63% of those responding to the survey saw no change in employment in the third quarter. About one-fourth of the respondents in both areas predicted more hiring, and 9% of Valley business and 12.5% of Ventura County businesses said their work forces would shrink.

A third of the 394 Valley companies contacted for the study responded.