Chamber survey shows growing optimism, bigger plans for Omaha-area economy

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Posted: Tuesday, November 19, 2013 12:00 am

Omaha-area businesses are more optimistic today than they were a year ago about adding employees and making capital improvements — and even more so about cashing in on increased sales activity.

Still, an annual economic forecast survey revealed some caution, likely due to factors such as the slowdown in agricultural gains and lingering questions about interest rates and health care costs.

“It's still steady as she goes,” said Chris Decker of the University of Nebraska at Omaha. “It's kind of like the long-distance runner pacing himself through his course: We're not going to see any booms or busts.”

Decker and a handful of other area economic experts were asked to reflect on results of the 2014 Economic Outlook that the Greater Omaha Chamber of Commerce is to release today. The findings, based on about 150 responses from Omaha-area businesses, are used to help chamber officials build recruitment strategies and to help existing companies prepare for the future.

Of businesses who voluntarily participated, 58 percent said they expect faster growth for the Omaha metro economy in 2014. That represents a higher degree of faith than last year, when 46 percent anticipated faster economic growth in the coming year.

More specifically, 70 percent of respondents expect to increase sales volume in the coming year (compared with 56 percent in last year's survey); 44 percent expect to beef up employee counts (compared with 37 percent in previous survey); and 40 percent (compared with 32 percent before) plan to invest more in physical improvements.

That a solid chunk of businesses expects to enhance plant or property is “exciting news,” said University of Nebraska-Lincoln economist Eric Thompson, who expects “moderate” growth for Omaha in 2014.

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“Capital expenditures is a leading indicator, so that speaks well not just for the year, but for the future,” he said.

Already this year, four out of 10 respondents reported increased capital expenditures over the year before, compared with 2012 when three out of 10 said the same.

Scott Strain, the chamber's senior research director who coordinates the survey, said this marked the first year since the Great Recession that the ratio of companies expecting to raise capital expenditures reached 40 percent.

Overall, Strain said, he was encouraged by responses, which he believes were buoyed by increasing home sales, job growth and taxable sales. “The consumer in this market is hanging in there,” he said.

A weekend swarm at a local car dealership that just opened in May was evidence of the interest.

Randall Crutcher of Performance Chrysler Jeep Dodge Ram of Bellevue said the store closed its doors Saturday at 6 p.m., but staff stayed through 9 p.m. to wrap up paperwork.

“We're doing well; no complaints,” said Crutcher, Internet sales director. “Since we opened, every one of our forecasts we've hit.”

He said sales staff expects more to come. “We're really going to hit our stride next year,” he said.

UNO's Decker saw a positive sign also in the amount of local electricity consumed, which he said bodes well for manufacturing jobs.

Ernie Goss, an economist at Creighton University, expressed more muted enthusiasm.

While both urban and rural parts of Nebraska continue to benefit from strong agricultural and export sectors, growth is not as robust as in the past, he said. “Some of the wind is coming out of the sail of agriculture.”

Also looming, said Goss, are threats of higher interest rates and unknown costs of fuel and health care reform for small companies.

Said Goss: “In the overall context, especially long-term, I am very bullish on the Nebraska economy, but perhaps not quite as bullish as these folks.”

When asked about the future economy of the state and nation, Omaha-area survey respondents were far less optimistic than they were about their own backyard.

Thirty-seven percent (compared with 32 percent last year) said they expect faster growth in the coming year for Nebraska, and 26 percent (same as last year) expect faster growth for the nation.

Declining crop prices likely contributed to the less encouraging state forecast, said Thompson and Ken Lemke, an economist with Nebraska Public Power District.

While farm prices indeed affect big cities like Omaha and Lincoln, they said, the impact isn't as direct as in rural parts.

Omaha's economy also benefits from a more diverse industry base that includes finance and health care sectors, Lemke said.

When it comes to the national outlook, the economists said that continued conflicts on Capitol Hill can't help but be a damper.

The survey, conducted in September, occurred as a squabbling Congress couldn't agree on legislation appropriating funds for the fiscal year. That battle led to the Oct 1-17 partial federal government shutdown.

Because Omaha doesn't have as strong a concentration of federal government jobs as elsewhere, it isn't as affected by setbacks related to sequestration or a partial shutdown, said Nathan Kauffman, regional economist in charge of the Omaha branch of the Federal Reserve Bank of Kansas City, Mo.

Nonetheless, he said, uncertainty trickles down to local hiring and spending decisions.

Kauffman's economic forecast for the area: “Chugging along — nothing stellar, but still growth.”

The local economists said Omaha benefits overall from city leaders' stance on promoting growth, as evidenced by public incentives to build companies and event facilities.

“Our curb appeal is significantly better today,” Goss said. “And that contributes to growth as well.”

Performance in 2013:

>> Sixty-one percent of respondents reported higher sales activity, compared with 53 percent last year.

>> About 40 percent said they increased hiring, compared with one-third in 2012.

>> Four out of 10 increased capital expenditures, compared with three in 10 last year.

Expectations for local, state and national levels:

>> For the nation, 26 percent expect faster growth in 2014; 51 percent expect the same pace, and 22 percent expect slower growth. (For perspective, 26 percent of last year's respondents predicted faster national growth; 41 expected the same and 33 percent predicted slower growth.)

>> For the state, 37 percent expect faster growth in 2014; 57 percent expect the rate to be about the same, and 6 percent expect it to be slower. (Last year's survey found that 32 percent expected faster growth; 55 percent, the same; and 13 percent, slower.)

>> For Omaha, 58 percent expect faster growth in 2014; 36 percent expect the same, 6 percent expect slower. (Last year, 46 expected faster growth, 44 percent expected the same, and 10 percent expected slower.)

2014 expectations for Omaha business:

>> In sales revenue, 70 percent expect increased spending activity in the coming year (compared with 56 percent that said the same last year).

>> For hiring, 44 percent expect to increase employment count (versus 37 percent of last year's respondents).

>> In capital expenditures, 40 percent expect to increase spending (versus 32 percent of last year's respondents).

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