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Survey Finds Business Leaders More Confident

35% See Economic Conditions Improving, Although Overall Picture Remains Mixed

By Jonathan D. Epstein

February 10, 2011
 
Upstate New York business leaders are more confident about the economy and their own prospects than at any time in the past four years, but they still are not ready to invest or borrow too much. And they have little faith in state government, a new study shows.

Across the state, 35 percent of 645 business executives say they expect economic conditions in the state to improve this year, according to First Niagara Financial Group’s fourth annual survey of upstate business leaders.

That’s triple the 11 percent level of two years ago, according to the survey released Wednesday.

Of the executives, 29 percent say business conditions were better late last year than six months earlier. That’s up from 2 percent in 2008 and 16 percent in 2007, although almost unchanged from a year ago.

“The responses from these business leaders are the most positive we’ve seen since before the recession,” said George P. Evans, First Niagara’s research analyst. “In many ways, these results show that business is coming back in Buffalo Niagara and upstate New York.”

The survey reported an overall confidence index of 98.4 on a scale of 0 to 200. That’s still mixed, but 12 points higher than a year ago and 59.4 points higher than two years ago.

“I think it’s reflective of how far in

the hole we were rather than the sense of real optimism and confidence that exists today,” said John R. Koelmel, First Niagara CEO. “We’re on the cusp of a new normal. . . . Stability has been re-created. Nobody’s overexuberant, but things have calmed.”

Results were similar for the 197 Western New York business leaders in the survey.

Nearly 31 percent said they expect business conditions to improve, up from 25 percent last year and 12 percent two years ago at the start of 2009. Thirty-two percent expect more of the same.

“There has been a turnaround in opinions about the economy sinking deeper,” Evans said. “Business is coming back. It’s not on the fast track, but yet it appears to be moving ahead at a much faster pace.”

The confidence index for Western New York was 93.4, up 13.8 points from last year and 56.2 points from two years ago.

Still, the companies are hesitant to go out and start spending or borrowing.

While 27 percent of leaders statewide say they expect to “moderately increase” their work force — up from 21 percent last year and 18 percent in 2009 — 61 percent expect no change this year, and only 12 percent will cut staff, down from 17 percent last year. Locally, 28 percent will add jobs, 13 percent will cut, and 60 percent expect no change.

“It’s indicative of businesses trying to determine how they can do more with less,” Koelmel said. “They’re not leading with reinvestment. They’re waiting for that top-line growth to come, and then the investment will follow. That’s part of the new normal.”

Over the next year, 51 percent plan to buy such fixed assets as equipment, machinery and facilities — the same as last year. But 60 percent of those planning such expenditures intend to use internal funds, while only 28 percent plan to borrow from a bank.

Locally, 69 percent of the 49 percent planning to buy fixed assets will use internal funds, while 24 percent plan to borrow.

“That’s a good thing. The business community was overextended,” Koelmel said.

The biggest negative was an almost complete lack of confidence in state and federal government to improve the state’s business climate. Eighty-six percent of the executives said state government is doing a poor job of creating an environment in which they can succeed, while 93 percent don’t have faith in government’s ability to improve the climate.

“You can’t wait for the cure to come from the public sector. You can’t wait for government to pull us out of this crisis,” Koelmel said. “The private sector sees the need to lead in spite of government.”

The 24-question survey, conducted in the fourth quarter by Siena College Research Institute on behalf of First Niagara, included responses from CEOs, chief financial officers and other senior managers of private businesses in Buffalo, Albany, Rochester and Syracuse.

The businesses posted annual sales ranging from $5 million to $150 million in the service, manufacturing, engineering and construction, retail, wholesale and distribution, financial and food and beverage industries. A similar survey was conducted for the bank in Pennsylvania, where the results were more optimistic than those in New York.

“It’s given us a good feel for what we can expect the future to hold,” Koelmel said. “We’re very focused on the customer, and any intelligence that we can gather as to the views that our customers have about the world at large is beneficial.”

Despite the positive trends, 28 percent of the executives are most worried about continuing poor economic conditions, while 18 percent are worried about government regulation. Sixteen percent cited taxation as the biggest issue, and 12 percent said health care.

“This was years in the making, and it’ll be years in the rebound,” Koelmel said. “But the good news is there’s indications that the rebound has started and we’re moving again in a better direction, although it’s going to take a considerable amount of time to work its way back.”

jepstein@buffnews.com