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Southern Nevada businesses exude more confidence

Despite continued economic stress, the mood among Southern Nevada businesses is somewhat more optimistic for the first quarter than it was last year, a survey from the UNLV Center for Business and Economic Research showed.

The Southern Nevada Business Confidence Index rose above 100 for the first time in its three-year history.

“I guess they just think things have reached bottom and have to get better,” University of Nevada, Las Vegas economist and research center director Stephen Brown said Thursday. “On average, we saw a favorable response in every category.”

Thirty percent of respondents said economic conditions in Nevada would be somewhat better in the coming quarter, compared with 22.5 percent who said somewhat worse. The majority (41.3 percent) said conditions would remain the same.

Strong optimism also was shown for industry sales and profits, with 36.7 percent of respondents in each category expecting a moderate increase. About one-fifth expect a moderate decrease in profits and 16.5 percent expect a moderate decrease in sales.

Hiring expectations did not fare so well in the survey. Only 13.9 percent thought they would see a moderate increase in hiring, compared with 17.7 percent who see a moderate decrease. Sixty-two percent see no change.

“That actually mimics the national levels, which is business hiring and investment is lagging in this recovery quite a bit,” Brown said.

Though it still trails the national economy, Southern Nevada is showing signs of life with increased gaming revenue, visitor volume and taxable sales in the second half of 2010, he said. The region’s 14.9 percent unemployment rate remains the biggest challenge.

Businesses continue to shed jobs on a year-over-year basis, albeit at a slower pace, while many residents continue to struggle with home values and personal finances, said Brian Gordon, principal of Applied Analysis research firm in Las Vegas.

“Revenue and profitability expectations for Southern Nevada businesses remain weak relative to peak performances during the past several years, but there is a general sense the market may have reached the floor in the latest cycle,” he said.

It will take more than two quarters of sustained growth before most business owners and managers make any material moves in staffing, Gordon said. Businesses this year will focus on striking the right balance between revenues and expenses, while addressing debt service requirements and business reinvestments needs, the consultant said.

UNLV’s Brown said he’s hearing anecdotal evidence that December and January were good months for the local economy. The World Market Center reported a 25 percent increase in purchase volume, and new businesses have moved into renovated retail space in strip centers, he said.

Financial problems remain a concern. Among survey participants, 15 percent said the problems associated with financial conditions threatened the survival of their business and 40 percent said such problems depressed prospects for the future.

Of those who applied for a line of credit in the past year, only 11.3 percent were granted it for the requested amount.

More than half (55 percent) of survey respondents thought a long period of slow or no economic growth was the most serious problem. Others were more concerned about tax increases (13.8 percent), a socialized economy (8.8 percent), large cuts in desirable government activities (8.8 percent) and increased inflation (8.8 percent).

Overall, the survey suggests “cautious optimism” about economic prospects for Southern Nevada, Brown said. Employment and construction remain weak, and the real estate market is plagued by an overhang of both residential and commercial inventory.

At the same time, disposable income and consumer spending generally increased in 2010, consumer confidence is improving and international economic activity is generally on the upswing, the economist said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.

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