Arizona Business Leaders Confidence Index® Shows Tempered Economic Growth Expectations for the Third Quarter
Phoenix, AZ – The Arizona Business Leader Confidence Index® (BLCI) declined 3.7 points to 59.1 in the survey that looks ahead to the third quarter, 2005. Although this marks the first time that the index has dropped below 60, business leader generally remain positive as the BLCI continues to portend growth during the next three months, albeit at a slower pace.
“The expected slowing is due primarily to concern that higher fuel prices may adversely affect consumer spending as well as business costs,” said Marshall Vest, director of economic and business research at Eller College of Management at The University of Arizona. “Although business leaders are cautious at this point, consumer confidence recently moved higher due to a recent drop in gasoline prices and much better news from job markets.”
This quarter, all six components of the index declined, led by lower expectations for industry sales and the national economy. However, their respective index values of 60.8 and 56.8 continue to signal optimism for growth. The outlook for industry profits splipped a modest 2.2 points to 59.1, suggesting that panelists expect higher energy costs and rising wages to put pressure on business costs. Hiring plans moved down 2.8 points to 57.4, although the summer quarter is normally weaker than others due to seasonal variations.
Overall, the strongest component of the BLCI continues to be the panelists’ expectations for the state economy, which continues to experience strong economic growth propelled by consumer spending, a growing job market and continued real estate expansion. Even with a decline of 2.4 points, the 62.9 index value continues to signal growth.
The most recent survey also indicates growing differences between Phoenix and Tucson panelist sentiment. Tucson panel members turned decidedly more cautious as the BLCI for that area declined by more than eight points. While all components continue to signal positive growth expectations with readings in the low 50’s, Tucson panelists continue to view the state’s outlook more positively with an index value of 59.3. In contrast, Phoenix panel members lowered their index by only one point and all BLCI components remain above 60 except their expectations for the national outlook.
“Through our partnership with The University of Arizona we are very pleased to offer timely and relevant insight on issues that matter to business leaders across the state,” said George Boltwood, Compass' senior executive vice president and head of corporate banking. “By continuously measuring confidence concerning the state’s economy, the BLCI survey serves as a valuable tool for businesses and decision makers.”
This quarter’s survey also probed Arizona business leaders about how they are dealing with higher energy costs. Not surprisingly, since Arizona is not an energy-producing state, very few panel members reported a positive impact on their business from higher energy prices. Nearly seven out of ten panel members indicated they are absorbing higher energy costs, while only 15% pass most of the cost on to customers. Significantly, seven percent have been able to neutralize the costs by becoming more efficient.
The BLCI is compiled by Compass Bank and its university partners at The University of Arizona’s Eller College of Management, The Center for Business and Economic Research at The University of Alabama, the Leeds School of Business at the University of Colorado and The University of Texas at Austin’s IC2 Institute. Complete results of all surveys can be found at www.blci.com.
The Economic and Business Research Center at the University of Arizona’s Eller College of Management was established by the State Legislature more than 50 years ago to provide relevant economic data to the Arizona business community. The Eller College of Management supports more than 4,500 undergraduate and 600 graduate students. The Eller College is known for its innovative curriculum, internationally recognized faculty, advancing research, and excellence in entrepreneurship, MIS, and social responsibility. Eller ranks at the top in grant and research dollar generation, has a top five MIS Department, and has nationally ranked undergraduate and graduate programs. The College is located on The University of Arizona campus in beautiful Tucson, Arizona. Visit www.eller.arizona.edu for more information.
Compass Bank is a subsidiary of Compass Bancshares, Inc., a Southwestern financial holding company with $28.8 billion in assets and 385 full-service banking offices in Alabama, Arizona, Colorado, Florida, New Mexico and Texas. Compass Bancshares is among the top 30 U.S. bank holding companies by asset size and ranks among the top earners of its size based on return on equity. The company's earnings per share have increased for 17 consecutive years and dividends per share have increased for 24 consecutive years. Additional information about Compass, a member of the S&P 500 Index, can be found at www.compassweb.com.
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