Smiling through pain Nearly half of Hawaii's businesses saw their revenues improve last year from distressed 2001 levels, but the majority of merchants expect growth to stagnate this year with the threat of a U.S.-Iraq war hanging overhead.
A bank survey finds Hawaii businesses
saw revenues bounce back last year,
but optimism is muted for 2003By Dave Segal
dsegal@starbulletin.comIn a signal that the state's economy is rebounding from the 9/11 terrorist attacks, the Business Banking Council semiannual survey released today found 47 percent of respondents experienced an increase in gross revenues from a year ago and 40 percent of retailers saw more customers than in 2001.
But Barbara Ankersmit, president of Qmark Research & Polling, said survey watchers shouldn't get too optimistic about the rebound because the numbers are coming from an abnormally low base due to 9/11 and are about at the same level they were two years ago.
"I'm a little worried people will get optimistic with gross revenues up 47 percent when actually we're coming off of a big decrease last year," said Ankersmit, whose company conducted last month's survey. "Businesses are sort of worried, and I imagine if we went into the field right now, they'd be a little more worried because of all the war talk."
Fifty-six percent of the businesses polled said they expect the economic outlook will remain unchanged over the course of this year, with 29 percent expecting improvement and 12 percent anticipating things will get worse. The number of those expecting the economy to improve has stayed roughly the same over the past three survey periods.
The 47 percent of companies reporting increases in gross revenues over the past year showed a big bounce over the survey conducted in the second quarter of 2002 when 28 percent posted gains.
Qmark's survey, sponsored by American Savings Bank, questioned 400 companies. It divided the businesses into groups based on size and equally weighted the answers. It also used the responses to derive indexes based on performance and optimism.
The performance index, which measures changes in employment, gross revenues and profit before taxes, jumped to 109 in the first quarter of 2003 from 99 in the second quarter of 2002 -- the last time the survey was done -- and from 102 a year earlier. However, the performance index was still down 7 percentage points from 116 recorded in the first quarter of 2001.
A more telling gauge might be the optimism index, which monitors businesses' general outlook for the economic future of the islands. The index's 121 reading for the first quarter of 2003 was barely up from 120 in the second quarter of 2002 but was down from 122 two years ago and 128 three years ago. It was up 7 percentage points, however, from 114 in the first quarter of 2002 when the economy was reeling from 9/11.
Retailers, who also were measured separately, had a better performance score than overall businesses with a 111. However, they were less optimistic than overall businesses with a 116.
"After 9/11, the visitor industry -- hotels and retail -- were the hardest hit," said Carol Pregill, president of trade group Retail Merchants of Hawaii. "I had members reporting sales decreases of up to 80 percent. Now, I think talk of war, plus the North Korea situation, is having an impact on optimism. I think everybody is prepared to carry on business as usual but I expect that talk may be coloring the optimism a little bit."
Ankersmit, who described 2002 as a rebuilding year, said businesses haven't made any gains in two years due to the dip from 9/11.
"Businesses haven't grown and businesses thrive on growth," she said.
The lack of growth can be seen in staffing levels, which continue to waffle despite state unemployment that in December declined to a two-year, non-seasonally-adjusted low of 3.8 percent.
Fifty-nine of the businesses polled said staffing levels have remained the same over the past year while 17 percent have increased their labor force and 24 percent have cut their number of workers.
A bright spot for retailers was that 32 percent of businesses reported that average customer expenditures had increased from the previous year, a 21 percentage-point increase from the previous year.
"We have seen with the increases in home sales that the local consumer has been spending," Pregill said. "You buy a house and you need home furnishings. I think the spending that has gone along with the increases in home sales has really helped pick up the slack for (the decline from) the visitor industry."
Despite improving revenues, however, Pregill said businesses are saddled this year with rising costs due to increases in the minimum wage in January and an increase in workers' compensation insurance premiums.
"If revenues are going up and expenses are going up at the same time, you haven't made any giant steps forward but you're still surviving," she said.
The survey also found that nearly nine out of 10 businesses had optimistic expectations for economic improvement in the state under the Lingle administration. Thirty-nine percent were very optimistic and 49 percent were somewhat optimistic while 5 percent had some degree of pessimism. The remaining 7 percent didn't know.
