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San Diego business outlook: Survey respondents expect slow recovery

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The San Diego economy is not looming on a double-dip recession, but expectations have solidified toward a rocky and slow path to full recovery, according to a Daily Transcript survey sampling business leaders in San Diego County.

The survey revealed that 92.2 percent of respondents say general business conditions will be better than or equal to the previous six months. This is slightly less optimistic than the 96.7 percent of respondents who answered similarly in May.

Compared to a Daily Transcript survey in May, expectations for an increase in their companies’ capital spending rose slightly to 35.8 percent from 35.6 percent. Only 15.8 percent of business leaders expect a decline in capital spending, compared to 16.7 percent in May, while 48.5 percent expect capital spending to remain constant over the next six months.

Adjusting for seasonal variations, The Daily Transcript survey showed 43.6 percent of San Diego business leaders expect net earnings after tax to increase in the next six months, 17.2 percent expect to see a decline, and 39.3 percent expect net earnings after tax to remain constant.

According to business leaders, prices will continue to be stable over the next six months. Although 49.4 percent of respondents expect an increase in the real volume of goods and/or services sold, the majority of business leaders, 60.1 percent, plan to make no change to the average price of their goods and/or services. Inflationary pressure should be moderate with 26.4 percent of business leaders expecting to increase prices, another slight increase from 19.8 percent of respondents who answered similarly in May. The county should see a minor drop in prices with only 13.5 percent of business leaders planning a price reduction.

Wages will continue to remain sticky over the next six months -- 61.2 percent of business leaders expect average employee compensation to remain constant. While 29.7 percent foresee increasing wages at their businesses, only 9.1 percent of business leaders plan on reducing employee salaries.

The survey showed 47.2 percent of business leaders in San Diego expect to increase their number of employees in the next six months, 40.5 percent expect their companies’ employment level to remain constant and only 12.3 percent expect a decline. During the past six months, 40.7 percent of businesses surveyed actually increased their number of employees, 24.1 percent decreased their employment level, and 24.1 percent showed no change.

An overwhelming 81.1 percent of leaders expect an increase in health insurance costs, coupled with a relative split in expectations for taxes to increase or remain the same, will dampen growth and add uncertainty in the San Diego economy during the next six months.

Survey participants were members of recent Daily Transcript Executive Roundtables.

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