Written by The Business Journal Staff
And as the first businessman president — not previously serving in elected office or the military — he is already having a local and national impact on how other business owners envision the next four years.
First, there was a nearly 7-percentage-point bump in the business confidence category, according to the November San Joaquin Valley Business Conditions Index. The index, modeled after the national Institute for Supply Management index, is compiled from surveys of individuals making company purchasing decisions in the counties of Fresno, Madera, Kings and Tulare.
The business confidence index of 59.4 was formulated after the election, said Ernie Goss, the Craig School of Business research faculty member who produces the monthly index. It was the highest business confidence score for all of 2016, and represented the single-largest bump.
Goss said one survey respondent remarked, “The election and coming pro-growth policies are very positive.”
Indeed, Trump stumped hard on reducing government regulations that he called a burden to businesses. His Cabinet choices have also included titans of business with a net worth greater than the world’s 70 smallest countries, reported the Boston Globe.
Michael Der Manouel, Jr., president and CEO of Der Manouel Insurance Group and a local Republican activist, believes Trump represents a welcome departure from the current administration.
“Everyone I know is very optimistic about the potential for a better business climate,” Der Manouel said. “California business owners are still stuck with a hostile state government and a business friendly rating near the bottom of the 50 states, but the federal government can do much to help offset the challenges Sacramento presents us day in and day out.”
The national outlook is similar. The Wells Fargo Small Business Index, which measures owners’ optimism, rose to 80 from a reading of 68 taken in July and 54 in a survey a year earlier. It was the highest reading since it registered 83 in January 2008, in the early days of the Great Recession.
Thirty-six percent of the owners surveyed said they plan to hire in the next 12 months, up from 21 percent in July.
Revenue expectations helped feed the boost in optimism in the Wells Fargo survey. Fifty-eight percent of owners forecast their revenue would be up in the next 12 months, an improvement from 48 percent in July. That is also increasing owners’ plans to spend on computers, machinery and other big-ticket items — 35 percent plan such expenditures in the next 12 months, up from 25 percent.
Seventy-seven percent forecast their companies’ financial situation would be good over the next 12 months, up from 73 percent in July.
Goss said he is skeptical that local November boost in business confidence is tied entirely to Trump. He said some of that increase could be attributed to a general relief that the contentious election was over, and that some semblance of certainty could return to the business owner’s outlook.
He said recent increases in mortgage interest rates, as well as the federal funds rate, are also reflections of a stronger economic outlook.
“I think there’s a Trump bump in optimism reflected in interest rates and confidence numbers,” Goss said. “We will have to wait and see.”
The outlook isn’t all rosy to economists. The California Lutheran University Center for Economic Research and Forecasting in Thousand Oaks released a forecast saying not much at all is likely to change under President Trump.
The Center based this on convictions including a strong status quo bias in politics and governance and a “natural, unceasing slide toward greater centralization of government authority,” and “greater regulatory overbearance.”
“We don’t believe that Trump’s election has changed any of these underlying fundamentals,” according to an essay by forecaster Matthew Fienup. “As it relates to policy, we believe Trump will not succeed in changing (and in many cases may not even attempt to change) many of the policies which are primary drivers of poor economic performance.”
Fienup cites no significant changes to monetary policy under Fed Chair Janet Yellen, a continuation of the era of “ultra high federal budget deficits” and an ongoing unwillingness to rollback regulatory excess.
“We would like to think that, with a business man and political outsider as president, economic policies are likely to tilt toward free markets, with a roll-back of regulation,” Fienup wrote. “Yet we are chastened by the two most recent midterm elections, which sent giant waves of new legislators to Washington, many of whom campaigned on the promise to roll back regulatory excess. They have little to show in terms of reform.”
Goss is bullish, though, on Trump’s plan to repatriate tax revenue from multinational firms that park their earnings in foreign countries to avoid U.S. taxes. He points out that while business optimism doesn’t always lead to more business investment and hiring, he is hopeful a Trump plan to bring those revenues home at a tax rate of 10-15 percent as opposed to 35 percent may lead to more domestic business investment.
“We will take a wait-and-see approach to see if the repatriation of earnings leads to spending on plant equipment as opposed to dividends,” Goss said.
The Associated Press contributed to this story.