Top O.C. Execs’ Optimism Takes a Dip, Poll Finds : Growth: A UC Irvine survey shows 63% expect to hire or expand in the next five years, but that’s the lowest since ’92.
In contrast to recent years, Orange County’s top executives are feeling less optimistic about the local economy, according to new study released Tuesday.
About 63% of the local executives surveyed said they expect their businesses to add workers, buy new equipment or expand plants within the next five years. But that’s the lowest positive response since 1992, UC Irvine’s executive survey found.
Last year, 83% of the executives said they intended to expand their companies. About one-third said they intended to add workers this year, down from nearly two-thirds in 1998.
Two-thirds of the executives also said they expected their companies’ revenue to increase this year, down from 89% last year.
“We’re seeing a definite slowdown in actual and projected Orange County growth,” UCI economics professor Dennis Aigner said. “Nevertheless, we’re still growing rapidly and doing really well. There’s no way we could have continued the kind of accelerated growth we’ve had in the past three or four years.”
In 1998, Orange County companies reported less robust growth than in 1997, according to the annual study, which began in 1987. Only 59% of managers said their businesses improved financially in 1998, compared to 70% in 1997. And 11% said their businesses fared worse in 1998 than in 1997, the first time in five years that the number exceeded 10%.
Retail trade fared worst among the six industries surveyed, as 18% of these executives said business dipped last year. Manufacturing, facing a soft export market and increased international competition, came in fifth, Aigner said.
By contrast, the finance, insurance and real estate sector, fueled in part by the booming housing market, fared best.
Indeed, increased competition from Asian firms has eaten away at profits and sales at Morton Electronic Materials, a Tustin manufacturer of materials used in the production of circuit boards, President Dan Feinberg said.
“Over the past 18 months, business has been fair to poor,” said Feinberg, who has had to lay off some workers.
*
The UCI study was based on phone interviews with executives from 301 companies from May 5 to June 10. The industries represented include manufacturing; wholesale trade; finance, insurance and real estate; retail trade; business services; and professional services.
Bob Grant, managing partner of Deloitte & Touche in Costa Mesa, said his firm has boomed, reflecting the still strong local economy.
“Overall, the economy is doing really well, but I get the sense business will have some fall-off by the end of this year and slow down by next year,” he said.
Similarly, the hot housing market has meant booming sales at Drawer Box Specialties Inc., a cabinet component manufacturer in Orange.
“Our sales have grown by 30% in the past year,” Drawer Box President Glen Blankenship said. “In every new house and apartment, you’ve got kitchens and bedrooms with lots of dressers, drawers and cabinets.”
The study contained some glowing news. Only 9% of executives said they are likely to downsize within the next five years, a historic low.
Only 16% of the executives expected to locate some or all of their operations outside the county in the near future. Five years ago, 38% indicated they planned to move.
*
For the third straight year, 40% said Orange County was becoming a more attractive place to do business.
“In terms of the hottest areas in the country for new business development, desirability as a place to live and other good things, Orange County is certainly in the top 10 places,” Aigner said.
Executives cited high labor and housing costs and the difficulty in hiring skilled workers as the biggest barriers to doing business here.
They also believe the most serious problems facing the county are population growth and a lack of affordable housing.
That’s a change from last year, when they identified infrastructure shortcomings such as traffic congestion and air transportation.
The UCI study is consistent with findings of a recent report by Chapman University economists.
Both surveys found that the local economy had lost its sizzle but remained healthy.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Upbeat but Cautious
Although they remain generally upbeat, county business executives’ expectations for the local economy have cooled. Most think their companies will expand during the next five years, but expectations are the lowest since 1992.
Predicted One-Year Change
Downsizing: 4%
May downsize: 4
May expand: 28
Expanding: 30
No change: 34
Expansion Expectations, Five Years
*--*
Somewhat Very Likely Likely 1989 25% 44% 1990 28 40 1991 26 41 1992 33 27 1993 34 36 1994 33 40 1995 35 40 1996 37 42 1997 27 53 1998 21 61 1999 26 37
*--*
Employment Forecast
1999
Modestly more or substantially more: 34%
Fewer: 6%
Source: UCI Graduate School of Management
