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The Honolulu Advertiser
Posted on: Friday, August 24, 2001

Businesses not hopeful

By Frank Cho
Advertiser Staff Writer

Optimism about Hawai'i's economy is at its lowest level in two years as three out of four local businesses said they expect the state's economy to remain flat or worsen in the coming year, according to a survey of business leaders and top managers released today.

The Business Banking Council found 74 percent of businesses believe the economy will worsen or remain about the same, up from 61 percent a year ago.

"It's the visitor business. Both Japanese and westbound traffic has been real weak, and there doesn't seem to be a real turnaround," said Gary McCarty, president of Splash! Hawaii, a clothing retailer. "I think (visitors) are checking into hotels, and I am sure they are eating. But that's about it."

The most pessimistic were Hawai'i's largest companies — a reversal from a year ago when big companies led the state in optimism. More than 80 percent of businesses with 100 employees or more said they see the economy flat or slowing. Among small- or medium-sized companies, 69 percent said they expect the economy to shrink or remain flat.

The poor outlook has put the brakes on hiring at many Hawai'i companies.

Only 16 percent of business owners and managers said they expanded their payroll in the past year, down from 27 percent the previous year, according to the survey.

The Business Banking Council's optimism index — which measures a business' general outlook for the economic future of the islands — slid to 114, down from 122 in the first quarter. A higher number for the index reflects greater optimism. The index hasn't been this low since the second quarter of 1999 when it was 107.

The survey, conducted semiannually for the council by Qmark Research & Polling and sponsored by American Savings Bank, polled 404 businesses by phone from June 28 to July 11. The poll does not survey the same businesses each time and has a margin of error of plus or minus 5 percentage points.

Barbara Ankersmit, Qmark's president, said large companies typically have been more optimistic about the state's economy in past surveys.

"That would make me concerned if they have moved away from thinking things are better," Ankersmit said.

But Ankersmit said while large companies are are not as optimistic this time, that does not mean they are not bullish on Hawai'i's economy. She said those firms probably just don't think the state's economy is going to keep improving at the same rate as it had in the past year.

Ankersmit said big business attitudes tend to lead the way and she expects small businesses will likely follow.

The survey also found:

• The number of businesses that said they increased gross revenues in the past year fell to 44 percent, down from 55 percent in the second quarter of 2000. Small companies, those with between 10 and 49 employees, were the most likely to see an increase in revenue during the quarter, followed by medium and then large firms. About 55 percent of companies surveyed said revenues remained the same or decreased.

• As for when the economy should start to perform better, 29 percent of companies surveyed said it is starting to improve now. Twenty-three percent said it will take two years for the economy to improve and 16 percent of those surveyed said it will take five years. Only 13 percent said the economy will improve next year, 12 percent said it will never improve and 7 percent said they just didn't know.

• Only 38 percent of businesses polled reported pre-tax profits were up, compared with 44 percent in first quarter. Large companies were the most likely to report an increase in pre-tax profits while very small businesses — those with less than 10 employees — were the most likely to see a decrease.

• In the building industry, 45 percent of companies surveyed expect the dollar value of their projects in Hawai'i to increase in the next year. About 40 percent said they expect no change and only 15 percent said the dollar value of their projects will decline.