BIA Survey Says Business Confidence Weak

Data from the recently completed RKM/BIA 2009 Business Outlook Survey shows most business owners expect economic conditions to remain weak in 2009. They also expect unemployment levels to stay the same or increase, and they plan to reduce significantly their investment in capital expenditures.

Sponsored by the Business and Industry Association of New Hampshire and Portsmouth-based RKM Research and Communications, the fifth annual business outlook survey measured business confidence among a stratified random sample of 301 NH businesses. RKM polled 101 businesses with less than 10 employees and 200 with 10 or more employees, Nov. 10-20. The survey has a margin of error of +/- 5.7 percent.

The survey assessed business confidence using four indexes to predict future outcomes economic conditions, employment, revenue, and capital expenditures and benchmarked the index scores against survey results from the previous four years. The 2009 survey shows:

NH businesses expect overall economic conditions to remain weak in 2009. Fully 37 percent of businesses expect economic conditions to get worse in 2009, 23 percent expect them to stay the same and 33 percent expect them to improve. Last year, 38 percent of businesses expected economic conditions to get worse, 29 percent expected them to stay the same and 25 percent expected conditions to improve. According to R. Kelly Myers, president and chief analyst for RKM, confidence has improved from last year's low, but businesses still don't expect economic conditions to improve drastically in 2009. Instead, they expect conditions to remain the same or worsen only slightly.

Fewer businesses expect employment to increase in 2009. About 11 percent of businesses expect the overall number of employees working at their company to decrease in 2009, 79 percent expect it to stay the same and 8 percent expect it to increase. Last year, 6 percent of businesses expected the overall number of employees working at their company to decrease, 75 percent expected it to stay the same and 15 percent expected it to increase.

Future revenue expectations, which have diminished sharply since 2006, remain largely unchanged from last year. Twenty-three percent of businesses expect their annual revenue to decrease in 2009, as compared to 25 percent in 2008. However, in 2007 only 11 percent of businesses expected their annual revenue to decrease. In 2009, 45 percent expect revenue to stay the same and 30 percent expect it to increase. Last year, 35 percent expected revenue to stay the same and 36 percent expected it to increase.

Expectations for future capital expenditures dropped significantly, suggesting businesses may grow less in 2009 due to worsening economic conditions. Fully 25 percent of businesses expect their capital expenditures to decrease in 2009, 55 percent expect them to remain unchanged and 18 percent expect to spend more. Last year, only 18 percent of businesses expected capital expenditures to decrease, 47 percent expected them to stay the same and 34 percent expected to spend more on capital investments. Myers said, These results suggest that, due to the present economic environment, many businesses will not be able to sustain growth in 2009. Instead, they will try to remain competitive by tightening their belts and cutting costs."

Survey respondents were also asked to identify top concerns facing their business for 2009. More than one half of businesses cite poor economic conditions or a lack of clients and customers as major problems they currently face, and 44 percent cited poor economic conditions as their number one concern going into next year. This was also the number one concern last year, but survey results jumped 21 points from just 23 percent in 2007.

And 12 percent of respondents identified a new concern a lack of clients or customers as the second ranked business challenge. The high cost of health care also continues to rank high, with 11 percent of respondents citing it as the biggest problem facing their business.

Other new concerns that emerged this year are the high cost of materials or operational costs, lack of available credit, and low cash flow or revenue streams. This again reflects the overall concern over the weakening economy and recent problems with the credit markets.

According to Jim Roche, president of the Business and Industry Association, the survey results are not surprising and echo concerns voiced by BIA members.

The situation is really tough right now for many businesses, given problems in the housing and credit markets, said Roche. We are in a recession, and businesses are struggling to remain competitive and make payroll in the midst of declining revenues, slowing business activity and falling consumer spending.

Now, more than ever, it is crucial to maintain and support business-friendly policies and initiatives in our state, Roche said. State policy-makers must recognize that New Hampshire businesses are already under intense market pressure. Keeping New Hampshire's cost of doing business as low as possible is important if we are to maintain employment for hundreds of thousands of working men and women throughout the state.

To download a copy of the report, click http://www.nhbia.org/uploads/File/RKM-BIA_2009_Business_Outlook_Survey.pdf.