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Tuesday, Jul 23, 2024
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Index Shows Local Cos. Confident in Themselves, Their Sectors

Local business owners remain optimistic about their prospects for the next 12 months, with about twice as many predicting growth as stability and only a small percentage expecting declines. The findings are from the San Diego Business Journal-Cal State University San Marcos Business Confidence Index.

Despite heightened uncertainties in a variety of factors — from local drought and wage issues to national policy concerns with trade and health care — San Diego County businesses have been remarkably consistent in their outlook.

The most recent survey, conducted in May, produced an index of 76, slightly above the 72 from six months ago and 74 from a year ago. The index uses 50 as a baseline; above 50 indicates overall optimism in the local economy and below 50 indicates a lack of confidence. The most recent survey received 222 responses.

Good Cash-Flow Trends

“As the economy has improved, many small business owners are reporting a stronger financial situation, healthier revenues, and good cash-flow trends,” said Brian Lee, North San Diego Area President for Wells Fargo. “More business owners are also reporting plans to increase their capital spending and apply for new credit products, which is consistent with what our bankers are hearing from small business customers in our branches.”

Sixty percent of the respondents expect their firms’ profits to increase, and a third expect profits to remain about the same. The past 12 months produced increased profits for 52 percent of the respondents, while 33 percent were about the same and 15 percent declined.

Respondents are similarly upbeat about increases in sales revenue, at 65 percent, with 28 percent foreseeing similar revenue and 7 percent predicting a decrease. The past 12 months produced increased sales for 57 percent; 30 percent were stable; and 13 percent had a decline in sales.

Forty percent see staff growth in the next 12 months. Only two percent predict a reduction in headcount.

Two-thirds of the respondents see improvements in their industry.

Ray Major, chief economist for the San Diego Association of Governments (SANDAG), says the survey findings reflect that business owners tend to be optimistic — not only that their business performance will improve but perhaps anticipating reforms in income taxes or the corporate tax rate.

He points out that 60 percent of the respondents expect higher profits but only 40 percent anticipate hiring additional staff, which would require significant productivity increases from the workforce.

Tuning Out Political Rhetoric

The business community has exhibited a self-leveling ability and owners have become somewhat immune to the political rhetoric, Major said. For example, they have largely already dealt with rising health care costs, and the recent terrorist attack in Manchester, England, did not have an impact on the stock market.

The Business Confidence Index has been developed over the past two years by the Cal State University, San Marcos College of Business Administration and the San Diego Business Journal. The initiative has used the business school’s Senior Experience Program, which matches teams of students with projects submitted by local businesses and organizations.

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