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Business Confidence ReportWinter2013
2013S O N O M A
C O U N T Y
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Winter 2013 Business Confidence Survey and Report
February 2013
The Sonoma County Economic Development Board (EDB), in partnership with the Sonoma
County Workforce Investment Board (WIB), is pleased to present the Winter2013 Business
Confidence Survey and Report.
Highlights from this Business Confidence Reportinclude:
The business confidence level for Sonoma County reached a new 6-year high in the
Winter of 2013 with a score of 6.36. When business executives considered their specific
industry in Sonoma County, the average confidence level rose slightly to 6.39.
The Economic Development Boards Purchasing Trends Index (PTI) was 70 this winter
making this the second year that Sonoma County has scored higher than the UnitedStates since 2007. This indicates that business feel less economically challenged operat-
ingin Sonoma County than in the US as a whole. Any score above 50 indicates thatSonoma Countys economy is expanding.
There are moderate expectations for wage and salary increase over the next year with33% of business anticipating increases of 1-2%, and 11% anticipating an increase of over
2%. An increase in wages and salaries reflects returning confidence in the economy, and
will help drive demand for goods and services in Sonoma County.
The business outlook over the next six months for Sonoma County is positive in several
industries. A large proportion of businesses reported wholesale profits and investments in
locations and equipment are expected to increase in the future.
Thank you for your interest in the Economic Development Boards research. For additional
information, questions, comments, or suggestions please contact us at (707) 565-7170 or
visit www.sonomaedb.org.
Sincerely,
Ben Stone
Executive Director
2011 Sonoma County Economic Development Board. The Economic Development Board (EDB) believes all datacontained within this report to be accurate and the most current available, but does not guarantee its accuracy orcompleteness. Use of data from an outside source does not represent an endorsement of any product or service bythe EDB, its members or affiliates. This publication can be made available in alternative formats such as Braille, large
print, audiotape, or computer disk. Please direct requests to (707) 565-7170 and allow 72 hours for your request to beprocessed. This report was prepared by Matthew Liedtke.
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Business Confidence
The business confidence level for Sonoma County
reached a new 6-year high in the Winter of 2013 with a
score of 6.36. In a survey conducted by the Economic Devel-
opment Board, business executives were asked their percep-
tion of current economic conditions in Sonoma County on a
10-point scale, with a score of 1 representing the lowest
possible confidence level and 10 the highest.When asked to
judge the current economic conditions solely in their industry,as opposed to Sonoma County as a whole, business execu-
tives expressed higher confidence with a score of 6.39.
Business confidence in Sonoma County has been
strengthening since the recessionary period of 2007-08.
Since hitting a low of 3.2 in the winter of 2008, confidence
has soared by nearly 100%. With confidence returned to
pre-recession levels, businesses will be more inclined to step
up hiring, make capital investments, and increase production.
Comparing business executives opinion about the perfor-
mance of their industry currently and over the next six
months shows an optimistic trend. The survey reveals that
during this period the average confidence level of Sonoma
County rises to 6.5. When business owners where asked
about confidence in their specific industry, the average antici-
pated confidence level dipped to 6.39. Industry results were
also mixed, with several indicating no change in confidence.
During the Summer of 2012, when the EDB conducted its last
business confidence survey, the six month forecasted confi-
dence was 5.3. It is certainly encouraging to see business
executives more confident than anticipated while adding
another successive year of growth.
www.sonomaedb
.org2
Business Confidence, 2013 Q1
Average ConfidenceLevel for Sonoma
County: 6.36
0
5
10
15
20
25
30
35
40
10987654321
Response
Frequency
ofRespon
se
Business Confidence, 2001-2013 Q1
Summer 066.80
Winter 136.36
Winter 08
3.20
3
4
5
6
7
'1'12'11'10'09'08'07'06'05'04'03'02
Agriculture
Technology
Prof/Financial
Services
Retail/W
holesale
Trade
Manufacturing
Hospitality
RealE
state
&C
onstruction
HealthS
ervices
Non-P
rofit/
Governm
ent
Other
Sonoma County Confidence Growth Within IndustriesCurrent vs. Next 6 Months
Education
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
0% 0%0%0%0%
Average ConfidencLevel by Industry:
6.39
Sonoma County Confidence Within Industries
Educ
ation
Othe
r
Real
Esta
te&
Cons
tructi
on
Tech
nolog
y
Prof
essio
nal&
Fina
ncial
Servic
es
Healt
hSe
rvice
s
Nonp
rofit/
Govt
Agric
ultur
e
Man
ufac
turin
g
Reta
il/Who
lesale
Distr
ibutio
n
Industry Confidence Over
the Next 6 Months
Current Industry
Confidence Level
Hosp
itality
0
1
2
3
4
5
6
7
8
9
10
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Purchasing Trends
The Purchasing Trends Index (PTI) value for Sonoma County
in the Winter of 2013 was 70. An index score above 50
indicates that the economy is expanding. The PTI survey
measures a companys performance in key industry metrics over
the past two quarters. This marks the second year that
Sonoma County has scored higher than the United States
since 2007.This indicates that business feel less economi-
cally challenged operating in Sonoma County than in the USas a whole.
By industry, technology has the highest PTI index value at
79 points, followed by agriculture with 76, and the other
category with 72. Businesses that identified themselves by
other where primarily in the tourism, media, and transportation
industries. High index values imply that these industries
performed especially well over the last two quarters.
Breaking the PTI down into its components allows us to identify
areas in which each industry did especially well and also where
businesses struggled. Two components, new customer orders
and production, indicated rapid expansion by scoring above
a 70 in each industry. The magnitude of the scores in new
customers further suggests that more consumer spending
is a main driver of Sonoma Countys economic performance.
The results in the employment component were positive, with
industries indicating that they are hiring more employees or
providing more hours for current employees.
www.sonomaedb.org3
10
20
30
40
50
60
70
80
'13'12'11'10'09'08'07'06'05
Purchasing Trends Index, 2005-2013 Q1
70
Sonoma County
National
Source: Institute for Supply Management (www.ism.ws)
PTI By Industry
0
10
20
30
40
50
60
70
80
Agricultur
e
Techno
logy
Retail/W
holes
ale
Trad
e
Man
ufacturin
g
RealEs
tate
&Co
nstru
ction
Othe
r
PTI By Industry Metric
Agriculture
NewCustomer
Orders Production EmploymentSupplier
Deliveries Inventories
Technology
Retail/WholesaleTrade
Manufacturing
Real Estate& Construction
Other
500 50 50 50 50 100
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Looking Forward
The business outlook over the next six months for
Sonoma County is positive in several industries. A large
proportion of businesses reported wholesale profits and
investments in locations and equipment are expected to
increase in the future. While employment and exports
showed strong performance, the majority of respondents
indicated that these categories would remain unchanged.
The employment outlook for agriculture and manufactur-
ing are among the strongest of all industries, with 67% and
61% of business executives anticipating a hiring increase,
respectively. On the other hand, health services reported a
negative outlook, with 50% predicting a decrease in employ-
ment.
The six month investment outlook broken down by indus-
try shows strong expectations across the board and most
notably in agriculture, and non-profits and government.
About two-thirds of business executives in hospitality, technol-
ogy, and manufacturing have a positive attitude towards invest-
ments over the next six months. In contrast, health service
representatives reported a negative-neutral outlook.
When asked their attitude toward significant capital
expenditures, the majority of business executives
responded that they were cautious. Capital expenditure is
important for the continued growth of infrastructure and
productivity of Sonoma County. Uncertainly regarding both the
United States and European economies prevents capital
expenditure because businesses are not sure they will return a
profit on their investment.
www.sonomaedb.org4
0%
10%
20%
30%
40%
50%
60%
70%
80%
6-Month Business Outlook
Increase
Decrease
No Change
Investments
in Locations-
Equipment
Full-time
employees
ExportsNet Profits
0% 20% 40% 60% 80% 100% 120%
Employment Outlook by Industry
Increase Decrease No Change
Agriculture
Technology
Prof/FinancialServices
Retail/WholesaleTrade
Manufacturing
Hospitality
Real Estate& Construction
Health Services
Non-Profit/Government
Other
Education
Attitude Towards Significant Capital Expenditures
Aggressive
Moderate
Cautious
54.5%34.6%
10.8%
0% 20% 40% 60% 80% 100%
Investments Outlook by Industry
Increase Decrease No Change
Agriculture
Technology
Prof/FinancialServices
Retail/WholesaleTrade
Manufacturing
Hospitality
Real Estate& Construction
Health Services
Non-Profit/
GovernmentOther
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Special Focus - Salary Projections
The Economic Development Board polls businesses on special
topic questions in each survey that are pertinent to current
economic issues. This survey asked about changes in wages
and salaries in Sonoma County for 2013.
There are moderate expectations for wage and salary
increase over the next year with 33% of business anticipat-
ing increases of 1-2%, and 11% anticipating an increase ofover 2%. About a third of business executives expect no
change. During the recession, business shifted more responsi-
bilities on each employee while keeping pay flat in an effort to
decrease costs. An increase in wages and salaries reflects
returning confidence in the economy, and will help drive demand
for goods and services in Sonoma County.
The majority of business executives expect the unemploy-
ment rate to fall over the next six months with 46.7% antici-
pating a decline, 41.1% anticipating no change, and 12.2%
anticipating a rise.
In the business confidence survey, the EDB asked when the
economy is expected to be back on track. The economic expec-tations of business executives are important factors in hiring and
capital expenditures. The majority believe it will be at least
two years, with 32% saying 2-3 years, and another 32%
saying 3+ years. Nearly 10% expect it will take less than a
year.
www.sonomaedb.org5
0-1%
1-2%
2% +
How do you anticipate wage and salary rates tochange in Sonoma County next year?
32%
11%
2%
No Change
Less than -1%
22%
33%
Decline
No Change
Rise
How you do you predict the national unemploymentrate to change in the next 6 months?
46.7%
41.1%
12.2%
0% 20% 40% 60% 80% 100%
3+ years
2-3 years
1-2 years
6-12 months
1-6 months
Agriculture
Technology
Prof/FinancialServices
Retail/WholesaleTrade
Manufacturing
Hospitality
Real Estate& Construction
Health Services
Non-Profit/Government
Other
When do you expect the economy to be back on track?
By Industry
Education
Total
32%
32%
27%
8%
1%
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Respondent Summary
The Economic Development Board distributed 234 surveys
representing 11 industry sectors in order to gather opinions
about the confidence of Sonoma Countys businesses. The
EDB received 106 surveys in response, for a response rate
of 45.2%. This is a high enough response rate to construct a
snapshot of the business sentiment in Sonoma County.
The EDB attempted to survey a broad range of businesseswhen conducting the Business Confidence Survey. Using
NAICS designations, we asked respondents to match them-
selves to the industry that closest represented their business.
The four most represented industries responding to the
survey were Professional and Financial Services (17.8%),
Other (16.8%), Retail and Wholesale Trade (15.9%), and
Real Estate and Construction (14.0%). Agriculture, Health
Services, and Education were the least represented industries.
The most common business size of those that responded
was in the 16-50 range. The 51-100 range had the second
highest frequency, with 22 firms reporting that many employ-
ees. The third highest was 1-15 employees, with 21 respond-
ing firms having that many employees. There were 10 total
firms that had either 250-500 or 500+ employees. This shows
a good representation of small, medium, and large businesses
included in the EDBs survey.
www.sonomaedb.org6
Response Rate
Did Not Respond
Responded
Total Number ofDistributed Surveys:
234
45.2%
Respondents by Industry
17.8%
16.8%
15.9%14.0%
13.1%
11.2%
0.9%
Agriculture
Technology
Prof/Financial Services
Retail/Wholesale Trade
Manufacturing
Hospitality
Real Estate & Constructio
Health Services
Non-Profit/Government
Other
Education
1.9%2.8%
2.8%
2.8%
Number of Employees per Firm
0
5
10
15
20
25
30
35
500+251-500101-25051-10016-501-15
Number of Employees
Frequency
ofRespon
se
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Economic Development Board
401 College Avenue, Suite D
Santa Rosa, CA 95401
(707) 565-7170
www.sonomaedb.org
With acknowledgement and appreciation to local key businesses
supporting Sonoma County Economic Development:
Director
Sponsors
Executive
REPUBL IC
CALIFORNIA
AGR I CULTURE
I NDUSTRY
RE CREAT ION
SONOMA
COUN
TY
County of Sonoma Board of SupervisorsSonoma County Health Services