Bay Area Council Survey of Business Executives Shows Dramatic Increase in Business Confidence.

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--Jan. 31, 2002

The Bay Area Council announced today the findings of its quarterly Bay Area Business Confidence Survey showing business executives increasingly confident about the Bay Area economy. Despite the recent economic slowdown, the January 2002 survey found 89 percent of the surveyed Bay Area business executives believe the regional economy will improve or remain the same over the next six months. The Bay Area Business Confidence Survey of 380 business executives was conducted January 7 - 18, 2002. The Bay Area Council conducts the survey quarterly, measuring changes in business confidence in the region.

Sunne Wright McPeak, President and CEO of the Bay Area Council, stated, "The strong underlying fundamentals for the Bay Area economy provide a sound foundation for the increased optimism for the regional economic outlook. Planned increases in capital investments and inventory levels will spur business activity throughout the Bay Area. A recovering economy will enable the Bay Area to regain its focus on addressing critical infrastructure needs in housing and transportation that will sustain the region's economic vitality and quality of life."

Business Confidence on the Rise

In a significant measure of business confidence in the Bay Area, six times as many respondents expect the Bay Area economy to improve (66%) as those who expect it to get worse (11%). Three-fourths (75%) of the respondents to the Bay Area Business Confidence Survey expect the national economy to be better six months from now, a considerable improvement on the 47 percent who said this in October. Eighteen percent currently expect the national economy to remain the same and only 7 percent think it will get worse. The majority of survey respondents are also optimistic about the prospects for their industry with 60 percent of business executives forecasting improvement in the next six months, while only 11 percent expect conditions to worsen.

"Bay Area business leaders clearly see the regional and national economy turning around. The Bay Area Business Confidence Survey reflects the significant change in focus of key decision makers from slowing down to rebuilding their businesses," said T. Gary Rogers, Bay Area Council Board Member and Chairman and CEO, Dreyer's Grand Ice Cream, Inc.

The Bay Area Business Confidence Index

The Bay Area Business Confidence Index for the January 2002 survey rose more than 30 percent over the index of the October 2001 survey. The Index expresses survey results in a single figure based on an average of responses to four key survey questions on the direction of the Bay Area Economy. The Bay Area Business Confidence Index for the January 2002 survey increased to 51 from 39 for the October 2001 survey of business executives. The Bay Area Council established the Bay Area Business Confidence Index to track changes in business executives' confidence over time.

Inventories Stabilizing 

More Bay Area executives report inventory levels increasing during the next 90 days rather than decreasing. This supports the view of Alan Greenspan, Chairman of the Federal Reserve in his recent address at the Bay Area Council's 2002 Outlook Conference where he noted, "Inventories in many industries have been drawn down to levels at which firms will soon need to taper off their rate of liquidation, if they have not already done so."

Capital Investment Increases

The majority of surveyed business executives expect capital investments to increase or stay at the same levels. Twenty-three percent expect to increase investment in IT with 51 percent keeping IT investment at the same level. On average, fewer than one in ten companies expect investments to decrease.

Type of investment   Increase  Stay the same  Decrease  Does not apply
                       (%)                               /Don't know

Capital                 22           46          12           20

I.T.                    23           51           9           18

Research & development  14           27           4           55

The Bay Area Business Confidence Survey

The Bay Area Council developed the Bay Area Business Confidence Survey to measure employer expectations of the Bay Area economy. The January survey is the second in a series of quarterly measures of business confidence. The next survey will be conducted in April 2002. Survey findings will be published in an upcoming edition of the Bay Area Economic Pulse and can be accessed from the Business Confidence survey page at www.bayareacouncil.org.

The confidential survey of 380 business executives was conducted January 7 - 18, 2002, by Evans/McDonough Company Inc. for the Bay Area Council with the assistance of McKinsey & Company. A database of Bay Area business executives was created for the Bay Area Business Confidence Survey with the assistance of the Bay Area Council, local Chambers of Commerce and other business organizations. Participating organizations include: Bay Area Council, Contra Costa Council, Contra Costa Economic Partnership, Economic Development Alliance for Business, Oakland Chamber of Commerce, San Jose Silicon Valley Chamber of Commerce, San Francisco Chamber of Commerce, San Rafael Chamber of Commerce, Santa Rosa Chamber of Commerce, Silicon Valley Manufacturing Group, Solano Economic Development Corporation, and Tri-Valley Business Council. All members in the database were invited to participate through the Internet or by fax. The survey results are weighted to reflect the approximate percentage of employees in each Bay Area County.

A key element of the Bay Area Business Confidence Survey is the establishment of a Bay Area Business Confidence Index that tracks changes in business executives' confidence over time. The purpose of the Index is to express the survey results in a single figure that can be related to expected changes in economic performance

The Bay Area Council

Founded in 1945, the Bay Area Council (www.bayareacouncil.org) develops and drives regional public policy initiatives and researches critical infrastructure issues. Led by CEOs, the Bay Area Council presents a strong, united voice for more than 275 major employers throughout the Bay Area region in promoting economic prosperity and quality of life. Sunne Wright McPeak has served as president and CEO of the Bay Area Council since 1996.

Evans/McDonough Company, Inc.

Evans/McDonough Company Incorporated (www.evansmcdonough.com) is a full service opinion research and strategic consulting firm serving a broad range of corporate, political and institutional clients. Founded in 1989, EMC's principals have been involved in thousands of public opinion studies, ranging from political and public policy strategy polls to extensive market share and customer satisfaction surveys.

For additional information, please visit the Bay Area Council's Web site at www.bayareacouncil.org.