Survey: National economy weighs on La. business plans

“A lot of (the concern) comes from the national media that percolates through everyone’s daily lives about conditions that still have a great deal of uncertainty.” ADAM KNAPP,   Baton Rouge Area Chamber

Large and small businesses in Louisiana do not foresee the national economy improving much in the coming months, and they will likely hold off on any increases in hiring, business development and investments, a recent quarterly business outlook survey by Capital One Bank found.

However, local business leaders are reasonably optimistic about Baton Rouge’s economy as the region rides an economic wave of activity largely supported by favorable natural gas prices.

The survey found large businesses to be more optimistic than small businesses as the large businesses reported improved economic conditions and better financial performance in the first quarter of 2012. However, both large and small businesses remain cautious in their attitudes toward hiring and business investments.

“Our survey results for the first quarter of 2012 suggest that many Louisiana small and large businesses have seen their overall business performance stabilize. While this is an encouraging sign, we’ll be watching for momentum to build as we head into the summer months and hope to see stronger performance translate into new hires and investments for growth,” Robert M. Stuart Jr., Louisiana State President for Capital One Bank, said in a statement. “The level of confidence that we’re seeing across-the-board is promising. As businesses look ahead to the rest of the year, we encourage them to think through financing and cash-flow options to help prepare for potential growth opportunities and cyclical challenges as the year progresses.”

In the Baton Rouge economy, cheap natural gas is translating into money in the pockets for the petrochemical corridor, encouraging the expansion of some plants and retrofits of others. The added construction projects will have a ripple effect through the Baton Rouge economy this year and on into 2015, Adam Knapp, president and CEO of the Baton Rouge Area Chamber, said in response to the survey.

“I think a lot of the optimism that’s happening — especially among large businesses — is driven by some of the regional and local conditions that are so good,” said Knapp.

“The natural gas prices that we’re seeing are really driving a burst of activity in the manufacturing sector, and that wave of activity, you’re seeing it happen in the construction sector.”

The surging economy doesn’t seem to be anecdotal, as key economic indicators like car purchases, sales taxes and private-sector job numbers in the area continue to trend up. Sales tax revenue for East Baton Rouge Parish was up 7.5 percent in the first quarter. Nonfarm employment in the Baton Rouge metro region grew by 1,000 jobs in March, 2,500 in February and 2,700 in January when comparing the numbers to the same period in 2011, according to Louisiana Workforce Commission data.

The economic analysis firm IHS Global Insight recently released a study looking at which states have returned to or surpassed pre-recession employment levels. Only Louisiana, Texas, North Dakota and Alaska can make this claim. The economic rebound in all four of these states is linked to their connection with the energy industry, the study concluded.

“If what you see in expectations of large business owners, especially in the Capital One survey, is better confidence this year from last year, it also seems to be playing out in the nonfarm jobs data,” Knapp said. “There actually is in fact, a better position overall that’s largely led by a handful of sectors that are up. And those sectors could drive other areas across the rest of the economy.”

The Baton Rouge business outlook for the national economy is likely closely in line with the statewide responses collected by the Capital One survey, said Knapp, where the key theme seems to be “uncertainty.”

“The same expectations you see in the survey about national conditions are real and they very much are concerned,” he reflected. “And a lot of that comes from the national media that percolates through everyone’s daily lives about conditions that still have a great deal of uncertainty.”

The survey also polled Louisiana consumers. Only a third of consumers (34 percent) in the state say business conditions are “excellent” or “good,” while 62 percent of consumers say local business conditions are “fair” or “poor,” which is 17 percentage points higher than the previous quarter. Even though Louisiana consumers seem to be uncertain about the business climate — or maybe because of it — they seem to be saving more. The number of consumers reporting better personal finances and savings is at the highest point in two years, the survey found. Twenty-five percent of consumers report that their personal savings increased during the past six months, though saving remains difficult among lower-income residents. Thirty-two percent of consumers with annual incomes less than $30,000 reported that their personal savings decreased significantly.

The Capital One Quarterly Market Pulse Survey was a telephone survey, conducted by the opinion research firm Braun Research of Princeton, N.J.. It completed 521 interviews with for-profit businesses across Louisiana from March 26 to April 6. The margin of error is +/- 6.8 percent for large businesses, which are those with more than $10 million in revenue, and +/- 5.5 percent for smaller businesses.

For the consumer outlook, the survey randomly interviewed 401 Louisiana adults, age 18 or older, from March 19 to April 2.