Business

Tuesday, Feb 12 2013 04:33 PM

Local business, consumer confidence slips even as economic fundamentals improve

BY JOHN COX Californian staff writer jcox@bakersfield.com

If it's really all about perception, Kern County's economy took a small but noteworthy turn for the worse toward the end of last year.

But if hard evidence matters more than personal observations, then things are probably no worse than they have been -- and business conditions may actually be improving.

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Such is the central dilemma in Cal State Bakersfield's latest Kern Economic Journal. Despite overall positive indicators, it found that Kern County businesses joined local consumers in feeling a little shakier about the economy in the fourth quarter of last year.

That's noteworthy because local business confidence had been on the rise last year, even as consumer sentiment weakened throughout 2012.

CSUB economist Mark Evans said he was struck by the contrasting pictures presented by the survey-based indices as compared with economic fundamentals.

One explanation, he said, is that the county had a strong 2012 overall but that economic improvement slowed as the year wore on. He said survey respondents may simply have picked up on the slowdown rather than remember conditions a year before.

He said there's also evidence that consumer sentiment indices don't track terribly closely with reality.

"Part of it is, you know, (a consumer confidence index) is nice as an indicator, but there's really not that much of a fit nationally or, probably, locally," Evans said.

Based on responses to the publication's random phone survey of local businesses, the journal lowered its Business Outlook Index from 117 in the third quarter to 112. (Any reading greater than 100 suggests optimism.)

CSUB economics professor Abbas Grammy noted that positive responses to the business survey dropped from 33 percent in the third quarter to 30 percent, while negative responses rose from 15 percent to 18 percent.

The journal then broke down these results into perceptions of existing versus anticipated economic conditions.

"Compared with the previous quarter, the Current Conditions Index dropped to 114 from 116. Likewise, the Future Conditions Index fell to 111 from 119," Grammy wrote.

The journal's Consumer Sentiment Index, meanwhile, continued to slip in the fourth quarter, going from 96 to 92. Its current-conditions gauge fell from 97 to 99, while its measure of future expectations dropped from 92 to 87.

Evans noted that surveyers asked consumer respondents to name factors that have affected their employment and financial conditions. The top factors that "brightened" the business outlook were the improving real estate market, local job growth and high oil prices. Factors that "darkened" the outlook, Evans wrote, were increased business taxes and fees, stringent business regulations and high health care costs.

The journal included a set of objective measures of the local economy. They were generally positive.

It said Kern's personal income per worker grew in the fourth quarter by $210 to reach $41,100 a year. A year before, the county incomes as a whole were $600 less.

Hiring was down. Kern's total employment declined by 1,100 people, or less than 1 percent from the third quarter to settle at 334,310 workers, the journal reported.

The local home market improved. The journal said Kern County's median housing price rose by almost 7 percent to $147,900. Meanwhile, the number of homes lost to foreclosure declined by 11 percent to 744 -- well below the 1,013 reported foreclosed on a year before.

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