The congressional stalemate over fiscal negotiations on taxation and spending, rising health care costs and California’s regulatory environment for businesses weigh down on the potential growth of San Diego’s economy, according to a Daily Transcript survey sampling business leaders in San Diego County.
The survey revealed respondents are split, each at 39.8 percent, on whether general business conditions will be the same or better than the previous six months. Contrasted with 34.9 percent of respondents anticipating improved conditions and 51.8 percent expecting no change in December 2011, the local economy has seen a slight, yet positive shift in expected growth.
However, leaders are currently more inclined to predict movement in the economy, either positive or negative, as the proportion of leaders anticipating a decline in general economic conditions rose to 20.5 percent from 13.3 percent in December 2011.
Compared to a Daily Transcript survey in June, expectations for capital spending maintained a similar distribution. Companies expecting to increase capital purchases slightly rose to 33.2 percent from 31.1 percent. The percentage of companies anticipating a reduction in capital spending increased to 22.4 percent, compared to 20.4 percent in June, while 44.4 percent expect capital spending to remain constant over the next six months.
Adjusting for seasonal variations, The Daily Transcript survey showed 41.9 percent of San Diego business leaders expect net earnings after tax to increase in the next six months, 23 percent expect to see a decline, and 35.1 percent expect net earnings after tax to remain constant.
Expected upward pressure on prices increased for the first time since May 2011, yet a majority of business leaders continue to predict stable prices over the next six months. Although 49 percent of respondents expect an increase in the real volume of goods and/or services sold, 57.3 percent of business leaders plan to make no change to the average price of their goods and/or services. Expected inflation increased, with 36.2 percent of business leaders expecting to increase prices, slightly higher than 30 percent of respondent who answered similarly in June. The county should see a minimal drop in prices, with only 6.5 percent of companies planning a price reduction.
Wages will continue to remain sticky over the next six months — 56.7 percent of business leaders expect average employee compensation to remain constant. While 32.7 percent foresee increasing wages at their businesses, only 10.6 percent of business leaders plan on reducing employee salaries.
Employment prospects continued to improve, with 42.5 percent of business leaders expecting to increase their number of employees in the next six months, compared to 40.4 percent in December 2011, and 39.5 percent expect their companies’ employment level to remain constant. Only 18 percent of leaders expect a decline. Over the past six months, 43.2 percent of businesses surveyed actually increased their number of employees, 14.7 percent decreased their employment level, and 42.1 percent showed no change.
A majority of leaders, 82.1 percent, expect health insurance costs to increase in the next six months. Combined with no business leaders surveyed expecting a decline in taxes and 88.6 percent foreseeing an increase in taxes, higher cost expectations and uncertain fiscal policies continue to dampen growth in the local economy.
Survey participants were members of Daily Transcript roundtables.