Business

Thursday, Nov 08 2012 06:59 PM

Businesses generally rosier about local economy than consumers

BY JOHN COX Californian staff writer jcox@bakersfield.com

Recent improvements in local business conditions have largely failed to register with county households, according to the latest edition of Cal State Bakersfield's Kern Economic Journal.

The quarterly report's central finding was that business and consumer confidence levels are moving in opposite directions, suggesting that households do not fully appreciate how much things have improved -- or, possibly, that the benefits of greater corporate earnings are not trickling down.

The journal's Business Outlook Index, based on a survey of Kern County business managers, improved between July and September from 114 to 117. (Index values above 100 indicate optimism; anything lower shows pessimism.)

At the same time, the publication's Bakersfield Index of Consumer Sentiment, based on random household surveys, slipped from 99 to 96.

The indices draw from a range of objective and subjective measures, from job creation to discretionary spending to financial expectations for the future.

For businesses, it was less a case of growing optimism as it was moderating pessimism. Positive responses by industry remained constant from the previous quarter, CSUB economics professor Abbas Grammy wrote, while negative responses fell from 21 percent to 15 percent and neutral responses improved from 44 percent to 52 percent.

More than a quarter (29 percent) of managers interviewed reported that employment at their company was constant. A little more than half (56 percent) said more jobs are open, and only 15 percent indicated reduced employment, Grammy wrote.

About half of survey respondents (52 percent) said financial conditions were unchanged, while a third (33 percent) reported increased sales and profits; 15 percent indicated sales and profits were down.

"Comparing with the previous quarter survey, we can see signs of improved optimism," he wrote.

Consumers saw things differently. The share of households stating that their financial situation had improved compared with a year before fell from 31 percent to 25 percent between the second and third quarters; there was almost no change in the percentage who reported being worse off.

Close to a third (30 percent) reported increasing their spending on discretionary items such as dining out and entertainment. Almost half (48 percent) said it was the same as usual, while about a fifth (22 percent) indicated it was less than normal.

Only 16 percent said their acquaintances were doing better, compared with 23 percent in the second quarter.

"Those looking for a strong sign of improved consumer sentiment will need to wait a while longer," CSUB economics department Chairman Mark Evans wrote in the journal.

In reality, Kern's economy expanded at an annualized rate of 4 percent as real personal income grew by more than $15 billion -- $150 million more than in the previous three months, the journal reported. Personal income per worker increased by about 1 percent to $40,890.

The county's unemployment rate declined over the third quarter from 13.7 percent to 12.5 percent as about 4,600 entered or reentered the workforce.

Looking forward, about half (48 percent) of the managers who participated in the university's business survey predicted that their companies' financial conditions would remain unchanged through the end of this year.

More than a third (38 percent) indicated sales would increase, and only 14 percent thought sales and profits would decrease.

Consumers were generally pessimistic about what lies ahead, with the journal's sub-index of expectations for the year ahead falling from 100 to 92.

The percent who indicated they thought this was a safe time to take on new debt fell from 29 percent in the last quarter to 16 percent between July and September.

At the same time, however, the share who said their situation would worsen over the coming year dropped from 29 percent between April and June to 21 percent in the third quarter.

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