Optimism Breaks Out All Over

Interest rates are down and CEOs' expectations of increased sales are up, according to a pair of recent surveys

When Federal Reserve Chairman Alan Greenspan sounded a recent note of cautious optimism, he was preaching to the choir -- at least as far as entrepreneurs are concerned. That's the conclusion to be drawn from two recent surveys charting business attitudes and the cost of borrowing.

According to TEC International, a group representing more than 6,000 CEOs of small- to midsize companies, 26% of those executives who responded to the organization's 2002 first-quarter survey agree with Greenspan that the recovery is at hand. Meanwhile, a slightly more cautious body of opinion -- 49% -- believes growth will begin to accelerate in the second half of 2002.

Asked which sectors are likely to see the greatest gains, 26% of CEOs cited tech and 29% named manufacturing. There is optimism, too, about biotech, which was seen by 21% of respondents as well placed to profit from the upswing.


  Closer to home, a clear majority of those surveyed were brimming with upbeat expectations about what their bottom lines will look like at the end of the year. While 27% say they expect sales to increase by between 1% and 10%, another 44% believe revenues will leap by as much as 20% or more. A mere 9% of respondents admit to fearing that their sales will decline in 2002.

When asked about capital spending, the responses were surprisingly cheerful: A full 27% reported plans to increase spending by up 10%, with another 16% saying they would be boosting investment by more than 10%. Just 20% planned to decrease spending and 37% said they would be making no adjustments to their investment budgets in either direction.

Nor should borrowing to finance that investment be too difficult, according to the latest interest-rate survey compiled by the national Federation of Independent Business (NFIB). Just 5% of those polled reported difficulty securing loans, vs. an impressive 35% that reported having fulfilled all their borrowing needs.

"The current economic weakness has not changed lender assessments of credit risk enough to produce an increase in credit rationing," observes NFIB Chief Economist William C. Dunkelberg, who notes that the average rate for short-term loans was 7.2%. "It also appears that owners have not felt the need to step up their borrowing activity." Of course, if optimism was money, there would be no need to borrow.

By Roger Franklin in New York

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