Execs say Bay Area economy weaker
Posted on Tue, Nov. 15, 2005
GROUP'S `CONFIDENCE INDEX' AT LOWEST POINT IN ALMOST THREE YEARS, SURVEY FINDS
By Matthai Chakko Kuruvila
Mercury News
Bay Area executives have grown more pessimistic about the region's economy, posting the gloomiest assessments on the Bay Area Council's ``business confidence index'' in nearly three years.
Twenty percent of Bay Area executives surveyed expect the local economy to worsen over the next six months. Three months ago, only 7 percent were downbeat in their six-month outlook.
``That's a pretty big drop'' in mood, said Jim Wunderman, chief executive for the council, a public policy group sponsored by businesses. ``We should all be concerned about the potential of the Bay Area economy, which has been gaining strength (but) is now losing it.''
Of the 517 top executives surveyed, 33 percent expected to hire workers over the next six months, while 10 percent planned layoffs. In April, 39 percent of executives said they planned to hire, while only 7 percent planned to reduce their workforce.
The survey does not try to determine why executives have certain views. But it was taken from Oct. 10 through Oct. 28, when the Gulf Coast was still reeling from the effects of hurricanes Katrina and Rita. Those storms sent oil, gasoline and natural gas prices soaring.
``We had a historic rise in energy prices,'' Wunderman said. ``It's hard not be impacted by that.''
Jonathan Kaye, chief executive of Fremont-based Calogic, which manufactures analog devices, said suppliers dependent on fuel have raised prices over the past year by as much as 20 percent.
``Part of the negativity is oil-driven,'' said Kaye, who is also chief executive of Clean Sciences, which cleans parts for semiconductor manufacturing companies. ``Oil has given a lot of suppliers an impetus to raise prices. I can't put a fuel surcharge on my company.''
Kaye said the fuel spike continues a trend of rising expenses, even as customers demand lower prices.
Kaye, like many survey respondents, is more positive about the future of his industry than the region as a whole.
While Santa Clara County executives have typically been the most pessimistic in the nine-county Bay Area over the past several years, the gap was slightly less this time around.
Twenty-two percent of Santa Clara County executives believed the economy was worse in October than it was six months prior. Throughout the Bay Area, 17 percent of executives believe the economy was doing worse.
Spiking fuel prices aren't the only problem, said Ed Trevis, chief executive of American Predator, a Morgan Hill manufacturer of computer motherboards.
The dollar's increasing strength on foreign markets has made exports a tougher sell. That adds to the high cost of doing business in the Bay Area, Trevis said.
``This has a tremendous effect, especially compared to other states where basic fundamentals are a lot lower than California,'' Trevis said.
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Contact Matthai Chakko Kuruvila at mkuruvila@mercurynews.com or (408) 920-2722.
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