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Uncertainty continues to dampen San Diego’s economic growth, with many businesses hesitant to increase investment in a climate of unknown tax and regulatory policies, in addition to diminishing confidence in governmental fiscal austerity, according to a Daily Transcript survey sampling leaders in San Diego County.

The survey revealed that 34.9 percent of respondents say general business conditions will be better than the previous six months, and 51.8 percent expect no change. Contrasted with 54.1 percent of respondents anticipating improved conditions in May, the local economy has seen a general shift toward slower expected growth.

Compared to a Daily Transcript survey in May, expectations for an increase in their companies’ capital spending declined to 38.2 percent from 40.1 percent. The percentage of companies anticipating a reduction in capital spending increased to 18.7, compared to 15.0 percent in May, while 43.1 percent expect capital spending to remain constant over the next six months.

Adjusting for seasonal variations, The Daily Transcript survey showed 42.6 percent of San Diego business leaders expect net earnings after tax to increase in the next six months, 17.6 percent expect to see a decline, and 39.8 percent expect net earnings after tax to remain constant.

Upward pressure on prices dampened, and a majority of business leaders continue to expect stable prices over the next six months. Although 47.3 percent of respondents expect an increase in the real volume of goods and/or services sold, 60.8 percent of business leaders plan to make no change to the average price of their goods and/or services. Inflationary pressure declined, with only 31 percent of business leaders expecting to increase prices, lower than 42.3 percent of respondents who answered similarly in May. The county should see a minor drop in prices, with only 8.2 percent of companies planning a price reduction.

Wages will continue to remain sticky over the next six months — 61.5 percent of business leaders expect average employee compensation to remain constant. While 35.7 percent foresee increasing wages at their businesses, only 2.9 percent of business leaders plan on reducing employee salaries.

Employment prospects slowed, with 40.4 percent of business leaders expecting to increase their number of employees in the next six months, compared to 51.1 percent in May, and 47.9 percent expect their companies’ employment level to remain constant. Only 11.7 percent of leaders expect a decline. Over the past six months, 34.3 percent of businesses surveyed actually increased their number of employees, 20 percent decreased their employment level, and 45.7 percent showed no change.

An increasing majority of leaders, 78.1 percent, expect health insurance costs to increase in the next six months. Combined with 50 percent of leaders expecting taxes to increase, uncertainty will slow the pace of the local economy. Until tax, health care and regulatory policies are defined, higher cost expectations will guide San Diego County business decisions.

Survey participants were members of Daily Transcript roundtables.

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