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The Sun Still Shines in San Diego

Executives’ Optimistic Outlook Still Glowing

2000 Year In Preview

The sun still shines on San Diego’s economy.

While local executives may not expect the kind of rapid expansion seen in recent years, they still expect 2000 and its immediate successors to be good business years for the region.

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Moreover, few local business persons expect the dreaded computer super-glitch called the Millennium Bug to have a severe impact on their businesses , though they don’t appear to feel that way about the region’s political leadership.

Those are the findings of the 10th Annual Deloitte & Touche/San Diego Business Journal Economic Outlook Survey.

For the 10th consecutive year, the accounting firm of Deloitte & Touche LLP and the Business Journal surveyed executives in 10 local industries: aerospace and defense, biotech, E-commerce, electronics and manufacturing, financial institutions, health care, real estate and construction, retail and wholesale, service, and tourism and hospitality. E-commerce was a new industry added this year.

Questionnaires were sent to 1,111 local companies and 194 responded, a 17.5 percent return. In addition to answering the questionnaires, respondents were also allowed to submit anonymous comments on the survey’s topics.

Overall, local business executives are more optimistic about 2000 than they were for 1999. Thirty-one percent predicted the national economy would see an improvement this year, while only 8 percent thought it would decline. Sixty-one percent expected little or no change.

Last year, only 23 percent of the respondents expected 1999 to be a better year for the national economy, while 21 percent expected to see a decline. The remainder , 56 percent , didn’t expect any change.

Executives showed a similar renewed optimism for California’s economy for the new year. Forty-three percent foresee a continuing improvement in the economy this year, while only 6 percent expect a decline. Fifty-two percent predicted no change.

In last year’s survey, only 36 percent had high opes for 1999, while 15 percent expected the state’s economy to worsen. Forty-nine percent foresaw no change in the business climate.

Locally, the optimism was the same. Forty-four percent of the respondents expected San Diego’s local economy to improve, slightly up from 41 percent in 1999. However, only 5 percent of this year’s respondents expected a local economic decline, less than half the number, 11 percent, who foresaw a worsening last year.

Looking to the near future, however, the executives surveyed this year remained pretty much in line with last year’s respondents. Eighty percent thought the outlook for local business growth in the next three to five years was good or excellent, nearly the same as last year’s responses, 78 percent.

This year, as last year, there was no appreciable pessimism for business growth in the foreseeable future.

Those answering the survey were less optimistic about their individual industries, though overall they appear to expect their business to hold steady.

Most , 51 percent , expected little change, good or bad, in their industry’s performance nationwide, while 39 percent expected some improvement. These figures showed little movement from last year’s survey responses.

Looking at their industry’s expected performance locally, respondents again showed little leeway in their answers over last year’s responses.

Fifty-two percent expect little change in their industry’s local performance this year, while 40 percent expected some improvement. That was a minor and probably statistically insignificant increase over last year.

Increases In Sales, Income

Most respondents, however, expected to see increases in sales and net income this year. Eighty-eight percent predicted an upswing in sales, with 31 percent expecting a sales jump of more than 10 percent.

Eighty-three percent of those surveyed expected an increase in net income, with 29 percent predicting a climb of more than 10 percent.

With the expected increase in contracts comes an increase in hiring. Fifty-six percent of the companies responding expected to hire new workers, while only 7 percent expected layoffs. These figures exactly mirror last year’s responses.

Eighty-four percent of the executives expected their companies to increase employee compensation this year, with most , 44 percent , predicting an increase of 3-4 percent.

Better compensation can probably be expected in a period of low unemployment and scarce workers. Sixty percent of the companies polled reported having “some” difficulty recruiting qualified employees in 1999.

Twenty-four percent of the companies said they had “extreme” difficulty finding workers. Overall, this year’s survey showed an increase in the number of firms encountering problems finding new employees.

Millennium Bug

Despite the surge in business technology, few of the businesses polled expect to suffer severe problems from the Millennium Bug , the pervasive computer programming glitch some predicted would cause widespread computer failures when the year turned from 1999 to 2000.

Fifty-three percent expected no impacts from the Bug, while 44 percent expected to experience some “minor” impacts. Only 3 percent expected “significant” impacts.

With the growth of electronic retailing and other Web-based commerce, 54 percent of the respondents said E-commerce had had a “minor” impact on their businesses, while 27 percent said the impact had been “significant.”

Last year’s election of a Democrat to the governor’s mansion doesn’t appear to worry too many respondents. Only 35 percent predicted Gov. Gray Davis’ election would have a negative impact on their business.

Twenty-three percent expected Davis’ rise to the gubernatorial office to benefit their companies, while 43 percent didn’t expect any impact at all.

Most of the respondents , 85 percent , still consider California to be a good place to do business, the same percentage as last year.

This remains a significant improvement in the respondents’ opinion of California since the question was first asked in 1993 when only 42 percent of those polled responded positively.

Unhappy With Local Government

Unfortunately, the respondents don’t share the same positive opinion of San Diego’s local government. Only 49 percent of the respondents said they felt any satisfaction in local political leadership, with 51 percent expressing dissatisfaction.

This is the lowest satisfaction rating local politicians have received from the business community since 1993, when only 18 percent voiced any satisfaction with San Diego’s leadership.

Only 55 percent of the business executives polled still felt San Diego had improved its ability to retain business, down from 73 percent just last year. Forty-five percent felt San Diego had failed to improve its relationship with business, up from 27 percent last year.

Nevertheless, an overwhelming majority of the respondents , 98 percent , said their companies had no intention of leaving San Diego.

Thirty-four percent of the businesses reported they expected to expand their physical facilities this year, with 79 percent of those planning to expand here in San Diego County.

UCSD Connect Sets Financial Forum

Local tech companies will vie for funding at UCSD Connect’s 16th annual Technology Financial Forum next month.

The event, scheduled for Feb. 24 at the Hilton Torrey Pines in La Jolla, will focus on high-tech and biotech firms seeking venture funding.

Presenters at the Technology Financial Forum will come from the software, Internet, telecommunications, electronics, and medical device industries. Qualcomm, Inc., co-founder Irwin Jacobs will be the featured speaker.

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