Finance: Customers Note Business Is Falling Off
Local finance industry leaders foresee a stagnant or moderately slowing San Diego County economy in 2001, prompted mainly by tighter credit and higher interest rates over the past three years that are finally cooling things down.
“Everything I’m seeing in terms of economic indicators is that we’re certainly in for a slowdown in our economy, whether or not it rises to the level of a recession, I’m not sure,” said Frank Mercardante, president and CEO of Encinitas-based Southwest Community Bank.
His comments were reflected in the results of the 11th Annual San Diego Business Journal/Deloitte & Touche Economic Outlook Survey of local financial industry leaders. Of the 18 executives surveyed, five believed the San Diego County economy would do better this year, 12 saw things as being about the same, and three predicted things would get worse.
For the California economy in general, only two saw it being better this year than in 2000, while 16 thought it would be about the same and two said it would be worse.
“Some of the businesses we work with at the bank are seeing some of their business fall off,” Mercardante said. “We have this vexing problem with the cost of energy and it doesn’t take too many things like energy or a business slowdown to have a significant impact.”
Projections
Uncertainty about what the Federal Reserve will do with interest rates has prompted one bank to make all of its projections on profits based on stable interest rates in 2001.
“We’re forecasting based on flat loan rates ,neither up or down,” said Robert McGill, president and CEO of Neighborhood National Bank. “People are getting worn out and most of us who believe in the business cycle see it’s getting to that point in the cycle where things will soften a bit.”
Both of the bankers mentioned Fed Chairman Alan Greenspan’s comments in mid-December about interest rates coming down as an indication the central bank might soon start lowering interest rates.
Potential For Growth
Both bankers and many of the finance executives see opportunities for their industry about the same this year as last year. Four of the executives surveyed see the economic conditions this year as better for their firms; 12 said they would be about the same; and four said they would be worse.
The finance industry leaders surveyed overwhelmingly said business growth would be good in the county over the next three to five years. Twelve of them thought it would be good, one said it would be excellent and seven said it would be fair.
McGill of Neighborhood National Bank said most of the business loans the bank is making are for expansion purposes.
“San Diego still has advantages , the slowdown is late in coming to California and here, and if the national economy doesn’t dip too low we might avert serious problems,” Mercardante said. “In San Diego we have a much more diverse economy than we did in the late 1980s, which will help things.”
