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U TA H ’ S QUAR TER LY EC ONO M IC S U RVEY OF BU S IN ES S EXECU T I V ES 2019 - QU ART ER 1


Steady as She Goes: Executives See Utah’s Economy in a State of Stasis I am continually impressed with the ability of Utah’s business leaders to be forward thinking and keep their “finger on the pulse” of our economy and business climate. This quarter’s results demonstrate the cautious optimism Utah CEOs have for both the success of their industry and increased profits for their company over the next year. While optimism regarding their own business and industries is strong, overall uncertainty for the next six months seems to point to a slight lag in economic expansion.

Derek B. Miller President and CEO Salt Lake Chamber

Utah’s growth remains top-of-mind for business leaders and the influence of policy decisions made by Congress and the Utah Legislature have an impact. Federally, Utah CEOs indicate congressional decisions regarding tariffs, regulation, tax reform and immigration having the greatest impact on Utah’s economy. Here in the state, CEOs believe the legislature’s action on housing affordability, health care, infrastructure and education directly impact our pro-business environment and economic growth. Growth brings incredible opportunity, but must be accompanied with thoughtful and collaborative planning among business, community and government leaders on every level. I am confident this can and will occur as we continue to anticipate challenges and find solutions that keep our state’s economy thriving.

Utah’s Economic Growth Rate May be Tempering The U.S. economy appears to be dialing back. The Federal Open Market Committee voted unanimously in their March meeting to keep rates unchanged. This decision was widely expected by financial markets, but underlines the caution with which the FED views current economic conditions. U.S. Real GDP growth came in at 2.6 percent in fourth quarter 2018, the second consecutive quarter of decline. Utah job growth remains steady, but dropped below 3 percent for the most recent year-over measure.

Natalie Gochnour Director and Chief Economist Kem C. Gardner Policy Institute and Salt Lake Chamber

Utah CEOs see this tempering and reflect it in their responses to the CEOutlook. The economic expectation index, which measures expectations six months from now, has declined for three consecutive quarters. And even though CEOs’ expectations for their own firms are higher today than five of the past six quarters, labor shortages, tariffs, housing prices, and gridlock in Washington, D.C. (over immigration, budget, and trade/border issues) continue to affect the economic mood. Brexit uncertainty isn’t helping. I don’t see a recession any time soon, but I do see slower growth in the works. I expect the Utah economy to feel different a year from now. Let’s keep a close look!

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CEOutlook: Utah’s Quarterly Economic Survey of Business Executives


SALT LAKE CHAMBER’S CEOUTLOOK CONFIDENCE INDEX AND JOB GROWTH The Salt Lake Chamber’s CEOutlook Confidence Index decreased from 55.5 in 2018-Q4 to 53.2 for 2019-Q1, as executives report economic conditions should hold steady. The Salt Lake Chamber’s CEOutlook Confidence Index is based on responses to the four standard questions included in each quarter’s survey (Questions 1-4). The Index can range from 0 to 100. A score below 50 indicates executives believe the economy will worsen; a score above 50 indicates a belief among executives that the economy will improve. Over the next year, we will fine-tune and evaluate the index to better understand its relationship to economic performance.

4%

Year-Over Job Growth

60 2%

45

30 1%

62.0

60.6

62.4

62.3

60.9

55.5

53.2

Index Utah Job growth

62.8

0%

66.3

15

2017-Q1

2017-Q2

2017-Q3

2017-Q4

2018-Q1

2018-Q2

2018-Q3

2018-Q4

2019-Q1

66.3 3.0%

62.8 3.1%

62.0 2.5%

60.6 3.0%

62.4 3.2%

62.3 3.1%

60.9 3.1%

55.5 3.3%

53.2 3.2%

0

Concern <50

75 3%

>50 Optimisim

90

Source: Index is produced from the Salt Lake Chamber’s CEOutlook with support from the Kem C. Gardner Policy Institute, including analysis of the Utah Department of Workforce Services’ statewide job growth data.

ABOUT THE SALT LAKE CHAMBER’S CEOUTLOOK The Salt Lake Chamber’s CEOutlook is a statewide economic survey of Utah business executives. Modeled after other national business sentiment surveys, it provides a forward-looking view of the Utah economy. The results of the survey are intended to help business and community leaders make informed decisions about likely future economic conditions. The survey will continue to be evaluated through 2019 to assess its predictive value. QUARTER

CONDUCTED

SAMPLE

Quarter 1

February-March 2019

40

Quarter 2

May-June 2019

Quarter 3 Quarter 4

August-September 2019 November-December 2019

— —

2019 - Quarter 1

2


WHILE FEWER EXECUTIVES BELIEVE ECONOMIC CONDITIONS HAVE IMPROVED THE PAST SIX MONTHS, MORE EXECUTIVES REPORT CONDITIONS HAVE HELD STEADY. Q1- How would you describe the current economic conditions in Utah compared to six months ago?

CURRENT ECONOMIC CONDITION INDEX 70

67.0

65.9

65.0

64.4

64.2

78%

65.0 61.7

60

55.6 50.0

50 40 30 20

13%

8%

10 3%

0%

0 2017 Q1

2017 Q2

2017 Q3

Significantly Better

2017 Q4

2018 Q1

2018 Q2

Somewhat Better

2018 Q3

2018 Q4

About the Same

2019 Q1

2019-Q1 N=40

Somewhat Worse

Significantly Worse

A GROWING NUMBER OF EXECUTIVES BELIEVE ECONOMIC CONDITIONS WILL REMAIN THE SAME THE NEXT SIX MONTHS, RATHER THAN GET BETTER. Q2- What is your expectation for economic conditions in Utah six months from now?

CURRENT ECONOMIC EXPECTATION INDEX 70

66.1 59.2

60

61.7

58.8

61.4

61.4

58%

55.5 50.0

50

45.6

40 30%

30 20 13% 10 0%

0 2017 Q1

2017 Q2

2017 Q3

Significantly Better

2017 Q4

2018 Q1

Somewhat Better

2018 Q2

2018 Q3

2018 Q4

About the Same

2019 Q1 Somewhat Worse

*Some totals may appear to exceed 100% due to rounding for simplification.

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CEOutlook: Utahâ&#x20AC;&#x2122;s Quarterly Economic Survey of Business Executives

0% 2019-Q1 N=40 Significantly Worse


OVER HALF OF EXECUTIVES EXPECT STABLE CONDITIONS IN THEIR RELATIVE INDUSTRIES SIX MONTHS FROM NOW. Q3- What is your expectation for your own industry six months from now?

INDUSTRY EXPECTATION INDEX 70

67.9 59.9

60

63.6

62.5 59.7

58.1

57.8 53.1

55%

53.1

50 40 30

25% 18%

20 10 3%

0%

0 2017 Q1

2017 Q2

2017 Q3

2017 Q4

Significantly Better

2018 Q1

2018 Q2

Somewhat Better

2018 Q3

2018 Q4

About the Same

2019-Q1 N=40

2019 Q1

Somewhat Worse

Significantly Worse

HOWEVER, EXPECTATIONS FOR THEIR OWN FIRM’S PROFITS REMAIN OPTIMISTIC. Q4- What are your expectations for your firm’s profits in the next 12 months?

EXPECTATION OF PROFIT INDEX 70 64.3

68.6

66.5 61.7

60

61.3

61.4

63.3

59.3

64.1

49%

50 40 30

28%

20 10%

10

13% 0%

0 2017 Q1

2017 Q2

2017 Q3

Increase Considerably

2017 Q4

2018 Q1

Increase Moderately

2018 Q2

2018 Q3

2018 Q4

Remain the Same

2019 Q1 Decrease Moderately

2019-Q1 N=39 Decrease Considerably

*Some totals may appear to exceed 100% due to rounding for simplification.

2019 - Quarter 1

4


Q5- Which factor do you anticipate will be the primary driver in increasing profits over the next 12 months? 5% 13% 21% 4%

7% 26%

17%

14% 34%

7% 14%

22%

13% 17% 33%

17%

13%

10%

42%

43%

73%

67%

38%

48%

2017-Q4 N=24

2018-Q1 N=23

2018-Q2 N=15

2018-Q3 N=21

2018-Q4 N=29

2019-Q1 N=23

Increased Demand

Increased Prices

Reduction in Costs

Other

OF THE FIVE RESPONDENTS ANTICIPATING DECREASING PROFITS, INCREASE IN COSTS AND INTEREST RATES, DECREASED DEMAND, STOCK MARKET VOLATILITY, AND TARIFF ISSUES WERE CITED AS THE PRIMARY DRIVERS. Q6- Which factor do you anticipate will be the primary driver in decreasing profits over the next 12 months?

14% 25% 33% 40% 50% 43%

25% 13%

20%

67%

14% 50%

29%

17%

33%

50%

38%

40%

2017-Q4 N=7

2018-Q1 N=6

2018-Q2 N=6

2018-Q3 N=2

2018-Q4 N=8

2019-Q1 N=5

Increase in Costs 5

Decrease Prices

CEOutlook: Utahâ&#x20AC;&#x2122;s Quarterly Economic Survey of Business Executives

Decreased Demand

Other


THE PAST YEAR HAS SHOWN A DECLINE IN EXECUTIVES REPORTING INCREASING HEADCOUNTS. Q7- Do you expect the overall headcount at your company to increase, decrease or stay the same over the next 12 months? 9%

10%

34%

3%

6%

43%

41%

45%

8%

5%

45%

48%

45%

57%

54%

53%

47%

48%

2017-Q4 N=40

2018-Q1 N=44

2018-Q2 N=35

2018-Q3 N=32

2018-Q4 N=49

2019-Q1 N=40

Increase

Stay the Same

Decrease

KEY COMMENTS FROM EXECUTIVES ON UTAH’S ECONOMY Below are highlighted, anonymized quotes from executives:

TARIFFS, SKILLED WORKFORCE NEEDS, POLITICAL CLIMATE, AND HOUSING AFFORDABILITY AMONG MOST OFT-CITED CONCERNS FROM EXECUTIVES. Q8- What emerging trends, risks and other factors do you think may have a positive or negative impact on Utah’s economy in the next 12 months? It seems like there is a housing bubble and home values continue to increase, which could create some issues for the long-term Utah economy. Medicaid will expand economy. Environmental air quality. Biggest risk is political uncertainty. Tariffs can potentially have a major impact on our raw material prices. Increased venture capital for the tech companies. Lack of labor. The major public and private construction projects and the business enablement that will come from these projects.

Available and qualified workforce. Availability and affordability of housing. Consumer confidence remains high. Tariffs affecting cost of goods. Our business is being negatively impacted by tariff issues with China and by other international visitors who are hesitant to visit and/or spend in the U.S. Additionally, stock market volatility is slowing spending in the local market. The government shutdown was extremely negative. While the shortage in the labor supply will continue to drive up labor costs in every industry throughout Utah, housing costs are rising even quicker, which may lead to more people below the poverty line. This may create an overall drag on the economy.

2019 - Quarter 1

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KEY COMMENTS FROM EXECUTIVES ON UTAHâ&#x20AC;&#x2122;S ECONOMY The following two questions change quarterly to reflect current economic conditions:

Q9- On scale of 1-5, how impactful do you feel the decisions made by Congress are to the Utah economy?

10%

20%

No Impact 1

58%

2

3

4

13%

Significant Impact 5

Below are highlighted, anonymized quotes from executives:

Depending on the decisions, certain ones can be felt very quickly. Legislation that is later enforced through administrative bodies can trickle down to businesses very quickly. Likewise, deregulation and gridlock has a surprising quick impact. Utah has the most diversified economy in the nation. This tends to insulate us from legislation from Congress. Taxes impact the economy, and making Utah more business friendly is important. Potential tariff action and any changes in tax policy. The government shut down caused our business to grind to a halt. Confusion by international visitors about tariffs, the threat of tariffs, and US policies about visitors being welcome in our country due to immigration/border policies are wreaking havoc with our international business.

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CEOutlook: Utahâ&#x20AC;&#x2122;s Quarterly Economic Survey of Business Executives

Gridlock in resolving trade and budget issues are impacting overall growth. The tax reform and business friendly changes around regulations as well as funding of projects in our state have been impactful. Decisions about taxation, regulation, immigration and infrastructure impact our fast-growing state. Comprehensive immigration reform including more visas for skilled labor and service labor would ease the shortages currently felt by many industries in Utah.


KEY COMMENTS FROM EXECUTIVES ON UTAH’S ECONOMY

Q10- On scale of 1-5, how impactful are the decisions made during Utah’s General Legislative Session to the Utah economy?

20%

No Impact 1

55%

2

3

23%

4

Significant Impact 5

Below are highlighted, anonymized quotes from executives:

Significant impact; and here there is risk that the local legislators legislate to a level that chokes or limits development of business with cross-border and interstate reach — a sort of local protectionism, intended or unintended — that can have negative impact and hurt both local business and living conditions. The Utah Legislature has a significant impact on the local market. Decisions about how to manage the Inland Port to help our economy continue to grow is a oncein-a-generation opportunity. Decisions about how to manage ongoing homeless issues across the state and particularly downtown influences whether or not people will continue to visit our beautiful city. Decisions about how to fund education determines whether or not we have a workforce that will be ready for the businesses that are currently thriving in our state. Decisions about how to manage the housing gap will haunt us for generations.

The actions of the Utah State Legislature has created a growth environment. The legislature tends to be pro-business and encourages business diversification and investment A well-managed state budget and investment in infrastructure, education, and big projects have a significant impact on our state economy The Legislative Session will address important issues in health care and housing affordability that impacts households and key industries

2019 - Quarter 1

8


KEY ECONOMIC INDICATORS FOR BUSINESS LEADERS QUARTER 1 AVERAGES

UTAH’S EMPLOYMENT SITUATION

The Utah Department of Workforce Services reported, as of March 22, 2019, that Utah’s employment grew by an estimated 2.8 percent, adding 42,400 jobs to the economy since February 2018. Utah’s current employment level registers 1,536,300. February’s seasonally adjusted unemployment rate declined one-tenth of a percentage point from the prior month to 3.0 percent. Approximately 48,300 Utahns were unemployed during the month and actively seeking work. The national unemployment rate decreased two-tenths of a percentage point from last month to 3.8 percent. Utah’s private sector employment grew by 3.1 percent year-over with the addition of 38,500 positions. Eight of the 10 private sector industry groups measured in the establishment survey posted net job increases in February, while Other Services showed no change and Construction lost 300 jobs year-over. “Over the past several years Utah’s economy has enjoyed moderate, sustainable growth,” reported Carrie Mayne, chief economist at the Department of Workforce Services. “February’s numbers show a continuation of this trend, with healthy job growth and low unemployment.”

BUSINESS LEADER SENTIMENT

The Salt Lake Chamber’s CEOutlook Confidence Index decreased from 55.5 to 53.2 for 2019-Q1, as a growing number of executives believe economic conditions will remain the same the next six months (a reading of more than 50 points reflects more positive than negative responses). The Conference Board Measure of CEO Confidence™, which had decreased in the third quarter of 2018, declined in the fourth quarter. The Measure now reads 42, down from 55 in the third quarter of 2018 (a reading of more than 50 points reflects more positive than negative responses). This is the lowest reading since Q3 2012 (CEO Measure: 42). “CEO Confidence declined in the fourth quarter, with both current conditions and expectations contributing to the year-end decline,” said Lynn Franco, senior director of Economic Indicators at The Conference Board. “Looking ahead, CEOs have grown apprehensive about growth prospects for the U.S., while sentiment regarding China and Europe has grown more pessimistic. India remains a bright spot, with CEOs mildly optimistic about growth prospects in early 2019. Ongoing trade and tariff issues, volatility in the financial markets, cost of debt, and expectations of moderating global growth are heightening concerns. If these conditions persist, we are likely to see weak confidence readings in the new year.” The MetLife & U.S. Chamber of Commerce Small Business Index recorded the first significant drop since the survey began in 2017. Conducted in the midst of the longest federal government shutdown in history, the survey score dropped from 69.3 in Q4 to 65.6 in Q1 2019. The change is largely due to a decline in economic outlook and expectations (both national and local), but small business owners report their fundamental business operations remain strong. More than half of small business owners (56%) expect increased revenue in 2019, down only slightly from last quarter (60%). More than one in four small business owners (27%) plan to increase investment over the next year, almost unchanged from Q4 (29%). A similar number of small businesses report plans to increase staff over the next year (29%), compared to last quarter (30%). The Business Roundtable’s 2019-Q1 CEO Economic Outlook Index is a composite of CEO expectations for sales and plans for capital spending and hiring over the next six months. While the Index eased in the first quarter, potentially reflecting uncertainty about softening global growth, CEO plans remained historically strong. The Index decreased to 95.2 in the first quarter of 2019, a decrease of 9.2 points from the previous quarter. Despite this decrease, the Index surpassed its historical average of 82.4. This marks the ninth consecutive quarter where the Index has exceeded the historical average, signaling a continued positive direction for the U.S. economy. 9

CEOutlook: Utah’s Quarterly Economic Survey of Business Executives


CONSUMER PRICES

The Zions Bank Wasatch Front Consumer Price Index fell 0.5 percent from January to February 2019 on a non-seasonally adjusted basis — the biggest month-to-month drop in 39 months. Year-over-year, the Index grew 3.9 percent, while the national Consumer Price index has increased 1.5 percent since February of last year. Slipping transportation costs were the largest factor in the overall decrease in Wasatch Front prices since January. Transportation prices fell 3.6 percent in February, their largest month-to-month slump since March 2018 and the eighth consecutive month of declining prices in the sector. Transportation prices include both the cost of gasoline and the cost of vehicles, both of which recorded February declines. Gas prices along the Wasatch Front are at their lowest point since December 2016. Housing and recreation costs both inched up in February, by 0.3 percent and 1.1 percent, respectively. Both housing and medical care prices experienced large year-over-year leaps, with housing prices increasing 8.3 percent and medical care prices growing 11.7 percent since February 2018. The average Utahn spends 38.7 percent of their monthly expenditure on housing costs, which is the highest percentage measured since July 2010.

CONSUMER ATTITUDE

The Zions Bank Utah Consumer Attitude Index (CAI) decreased 0.1 points to 113.8 in February. The year-over-year CAI dropped 4.1 points. In comparison, the national Consumer Confidence Index® increased 9.7 points to 131.4 this month. The Utah Present Situation Index slipped 2.2 points to 128.8 points in February. The number of Utahns who feel that jobs are plentiful dropped from 63 percent to 60 percent in February. Year-over-year, the Index increased four points, due primarily to Utahns’ perception that jobs are plentiful within the state. The Utah Expectations Index inched up 1.3 points to 103.8 points in February, due largely to Utahns anticipating the state economy will continue on the same trajectory for the next six months. Very few Utahns see business conditions worsening in the near future, with only eight percent anticipating deteriorating economic conditions. That number is down from an already low 12 percent in January.

2019 - Quarter 1

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If you are interested in sponsorship opportunities, please contact Jackie Sexton at jsexton@slchamber.com Join us for the 40th Giant in our City celebration honoring Fred Lampropoulos, CEO of Merit Medical, on May 31, 2019. The award was created to honor the lives of exceptional and distinguished public service and extraordinary professional achievement. It is considered the Chamber’s most prestigious award and is given periodically by the Chamber Board of Governors.

If you are interested in sponsorship opportunities, please contact Jackie Sexton at jsexton@slchamber.com Join us for the Salt Lake Chamber’s Classic Golf Tournament on June 24, 2019. Players will have a great day of golf at The Salt Lake Country Club, one of the oldest clubs in the western United States. The Salt Lake Chamber encourages members to include community leaders, business colleagues, and other VIP guests in their foursomes. Due to popular interest for this event, registrations are taken on a first come first serve basis.

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ABOUT THE SALT LAKE CHAMBER

ABOUT THE KEM C. GARDNER POLICY INSTITUTE

The Salt Lake Chamber is Utah’s largest and longeststanding business association. A statewide chamber of commerce with members in all 29 Utah counties, the Chamber represents the broad interests of the state’s 63,000-plus employers, which employ more than 1.4 million Utahns. This includes thousands of members and their employees.

The Kem C. Gardner Policy Institute at the University of Utah develops and shares economic, demographic and public policy data and research that help individuals and the community make informed decisions. Housed in the David Eccles School of Business, the Institute seeks to be a vital gathering place and center for independent economic, demographic and public policy thought leadership that helps the Utah economy to prosper. The Institute is a strategic partner with the Salt Lake Chamber in serving Utah.

CEOutlook: Utah’s Quarterly Economic Survey of Business Executives


RESPONDENT INDUSTRY MAKE UP SECTOR

NUMBER RESPONDING

QUARTERS

Q1

Finance, Insurance Real Estate, Rental & Leasing

2018 Q2 Q3

Q4

Q1

2019 Q2

TOTAL POSSIBLE

3-YEAR CONTRIBUTION

Q3

11

10

9

11

10

11

25%

Manufacturing

5

3

4

6

3

6

14%

Professional & Business Services

5

5

4

5

5

5

12%

Retail Trade

4

2

3

3

5

3

8%

Education, Health Care & Social Services

2

2

1

3

5

3

8%

Construction

4

4

1

3

5

3

6%

Wholesale Trade

3

1

2

3

1

3

6%

Information

2

2

1

2

1

2

5%

Mining

2

2

2

2

1

2

4%

Arts, Entertainment, Recreation & Accommodation

2

2

1

2

2

2

4%

Transportation & Warehousing

1

1

1

2

1

2

4%

Other

1

0

2

1

0

1

3%

Utilities

1

1

1

1

1

1

>1%

Agriculture, Forestry, Fishing & Hunting

0

0

0

0

0

0

<1%

*Sample attempts to proportionally represent Utah’s business sectors. Sectors are determined by the Utah Department of Workforce Services FirmFinder.

METHODOLOGY The Salt Lake Chamber partners with the Kem C. Gardner Policy Institute at the University of Utah to design, tabulate and assist in analyzing the survey. Sixty business executives from Utah’s fourteen major industries are asked to respond to 6-8 questions, depending on their responses, about their company and Utah’s economic performance. Respondents are selected by each industry’s contribution to the Utah economy. Panelists come from a range of firm sizes and locations within Utah.

FOR MORE INFORMATION Abby Osborne Vice President of Public Policy and Government Relations Salt Lake Chamber 801-328-5071

Natalie Gochnour Director and Chief Economist Kem C. Gardner Policy Institute and Salt Lake Chamber 801-585-5618

Dianne Meppen Director of Survey Research Kem C. Gardner Policy Institute 801-585-5618

aosborne@slchamber.com

natalie.gochnour@eccles.utah.edu

dianne.meppen@utah.edu

2019 - Quarter 1

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Profile for Salt Lake Chamber

CEOutlook 2019 - Quarter 1  

The Salt Lake Chamber’s CEOutlook is a new statewide economic survey of Utah’s foremost business executives. As an authoritative business su...

CEOutlook 2019 - Quarter 1  

The Salt Lake Chamber’s CEOutlook is a new statewide economic survey of Utah’s foremost business executives. As an authoritative business su...

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