O.C. Execs’ Outlook Is Grim, Says UCI Survey

Business executives in Orange County have quickly cut back their financial expectations in the wake of the terrorist attacks, according to a survey released Wednesday. But those in finance and real estate said the Federal Reserve’s interest rate cuts have softened the blow from the weakening economy.

Overall, the poll by UC Irvine’s Graduate School of Management found that 20% of the respondents were expecting worse financial results this year. That compared with just 4% who said that in a similar UCI executive survey conducted in February.

In the latest survey, manufacturers in the county reported the biggest negative shift in confidence. About a third of the survey questionnaires were returned after the Sept. 11 attacks, and the responses from this group were decidedly more pessimistic than those who replied earlier in the month.

Thirty percent of those who responded after Sept. 11 had lowered their financial expectations for this year, more than double the percentage of those who had answered the question before the attacks.

“We were already in a declining economic environment, and the Sept. 11 events impacted it further,” said Dennis Aigner, a UCI economics professor who directed the survey.

Aigner noted that Orange County in the past has weathered economic downturns better than many other areas because of its diverse economy. But that may not hold this time around, he said. “Orange County could be hit harder by slumps in the travel industry because tourism is such a major part of our economy,” he said.

Apart from tourism, the biggest swing in financial expectations was seen in Orange County’s manufacturing sector.

The portion of manufacturing executives expecting better financial results this year shrank to 34% in September, a huge drop from 65% in February.

But UCI’s survey highlighted one bright spot. Sixty percent of executives in finance, insurance and real estate--a major industry group in Orange County--said their business outlook has improved because of the Fed’s aggressive campaign to lower interest rates.

The rate cuts are aimed at spurring business investment. Wallace Walrod, vice president of the Orange County Business Council, said he was hopeful that the Fed action will help bring about a change in the economic climate next year.

“Consumer confidence is down right now, but in the next six to 12 months, I think most businesses would be optimistic,” he said.

UCI’s survey polled 300 executives in February, and its September update included follow-up interviews with 122 of them. The executives surveyed represent small and large companies in major industry groups.