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Regional Business Owners Say Inflation, Rising Interest
Rates Pose Greatest Risk For Negative Impact On Pacific
Northwest Economy In 2006

  • The Rainier Group Survey Shows Confidence in Economy High, But Down Slightly

  • Confidence in Local, Regional and National Government Leaders Lacking

BELLEVUE, WASH. - December 16, 2005
Findings of The Rainier Group Business Owner Confidence Survey released today indicate that private business owners in the Pacific Northwest have confidence in the regional economy--but lack confidence in local, regional and national government leaders.

In addition, inflation, rising interest rates and the increasing costs of healthcare are the factors identified as the most likely to have a negative impact on business in 2006.

"Business owners are confident in the strength of the economy--and have been for a while," said Robert Gruber, president of The Rainier Group, which provides Business Transition PlanningTM for privately held companies. "However, key indicators indicate that some risk factors may be increasing."

Gruber added, "The forecast for 2006 is optimistic--but slightly shadowed by the potential for negative impacts."

Confidence High... But Leveling Off
According to the survey, released twice yearly and featuring the opinions of owners of large privately held companies located primarily in Washington and Oregon, business owners found the economy strong this year. Asked to rate the current business environment for their company on a scale of one to ten (one=worst, ten=best), the average response was a solid 7.1 compared to 7.3 in April 2005. In Washington state, business owner confidence was a slightly lower at 6.9 and down from 7.4 in April 2005.

Business owners also felt that the region was on solid footing when compared to the rest of the country. When asked, on a scale of one to ten (one=worst, ten=best), to compare the Pacific Northwest economy versus that of the rest of the country, respondents rated our region a 6.3.

"There is no doubt that the economy in the Pacific Northwest is healthy," said Gruber. "Since the recession in 2003, we have experienced much growth across the sectors--from construction to agriculture to technology and more--and the Pacific Northwest stands on solid ground.

Concerns for the Coming Year
Despite their confidence in the current business environment, business owners across the Pacific Northwest feel there is potential for negative impact in 2006.

When asked to select two items from a list of potential causes for negative impact, risks were rated as follows:

  • Inflation and Interest Rate Hikes--35 percent
  • Rising Costs of Health Insurance--22 percent
  • Rising Fuel Costs--20 percent
  • Weakened Federal Finances & High Deficit--13 percent
  • Natural Disasters & Terrorist Threats--9 percent
  • War in Iraq--1 percent

"Higher energy costs have significantly raised worries about inflation," said Gruber. "The federal budget is also a concern in the longer run."

Lack of Confidence in Government
The survey also showed a lack of confidence in the government. When asked about their faith in the ability of governmental leaders on a scale of one to ten (one=worst, ten=best), respondents gave low marks on all levels. Local leaders were rated 4.4, statewide leaders were rated 4.4 and national leaders were given a slightly higher rating of 5.3.

"The figures show a wariness of business leaders to depend upon our governmental leaders--on all levels," said Gruber. "At this point the lack of confidence is significant and reflects a perceived lack of leadership coupled with a lack of clearly defined positions and policies."

Key Indicators Positive--But Slightly Lower
Key indicators show that business owners are trending toward positive numbers in hiring, capital expenditures, revenues and profits--but although the figures are upbeat, they have slowed from previous surveys.

In the Pacific Northwest, business owners intend to increase or maintain staffing in the next six months: 52 percent will increase staffing levels in the next six months while 39 percent will maintain. In April 2005, 64 percent of respondents expected to increase staffing levels.

Companies also expect increases in revenues and profits: 76 percent of companies surveyed expect an increase in company revenues in the next six months--a positive number but a decrease from 96 percent in April 2005. Additionally, 81 percent of companies surveyed expect an increase in profitability in the next six months--lower than the 91 percent in April 2005. Capital investments remained mostly steady: 44 percent of companies surveyed expected to make significant capital investments in the next six months compared to 45 percent in April 2005.

"The numbers for key indicators are a bit lower than in previous surveys," said Gruber. "Since these businesses have been hiring, have been making capital expenditures and have seen growth in revenues and profits in 2005, the slight decrease is not unexpected. Concerns about some risk factors such as inflation and rising fuel costs--may also be weighing on business owners."

"Business owner confidence is strong and the potential for a positive economic outlook is great," continued Gruber. "But risks are out there--and owners are aware of them."

The latest The Rainier Group Business Owner Confidence Survey, released twice a year by The Rainier Group, was conducted in November 2005. It features the opinions of owners of large privately held companies, with annual revenues ranging from ten million dollars to 1 billion dollars, located primarily in Washington (62 percent) and Oregon (27 percent).
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THE RAINIER GROUP
Since 1988 The Rainier Group has provided more than 700 private businesses across the nation with Business Transition Planning? and related services through its offices in Bellevue and Portland.
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