The economic enthusiasm that marked last fall may be gone, but overall businesses in the Lehigh Valley do not feel a sense of gloom.
That’s the conclusion drawn by local economist Kamran Afshar, who recently shared the results of a survey that polled more than 200 Lehigh Valley businesses earlier this year.
He released the data for last month’s survey at DeSales University Center in Upper Saucon Township last week. Polling occurred Jan. 10 through Jan. 24.
Through the Lehigh Valley Business Sentiment Index, Afshar gathers survey data and reports on the results four times per year. He has been conducting the quarterly surveys locally since 1998. Afshar also serves as an economist for the Greater Lehigh Valley Chamber of Commerce and director of the Kamran Afshar Data Analytics Center at DeSales.
The overall outlook from these businesses has been even, Afshar said.
“Steady as she goes, with taking away the bells and whistles of October, but no despair,” Afshar said.
In October, the index rose to 69.4, but in January, it dropped a few points to 66.9. If the number drops to 50 or below, that signals the economy could be in a recession.
“What we can see in the data is that the extreme optimism of October has been significantly lowered.”
Businesses are still positive, he said, adding that participants do not expect a recession in the next six months.
The survey includes data on business projections, including purchases, hiring, and revenues for the next six months and comparing them with the prior six months. Participating companies include those in health care, education, retail, manufacturing and financial businesses.
Shutdown influences results
The federal government shutdown in January influenced the index results. While it had more of a national impact on federal workers, Pennsylvania and the Lehigh Valley, were not immune.
“The shutdown has a huge impact on our economy,” Afshar said. “If you don’t go to the store, goods are perishable. There are ripple effects. You don’t go to the restauranteur.”
The federal Tax Cuts and Jobs Act that passed into law in 2017 with much fanfare among the business community also played a role in shaping the respondent’s outlook, many of whom are small businesses. About 55 percent of the companies in the Lehigh Valley have between one and five people, Afshar said.
The most significant change in last year’s law was the cut in the corporate tax from 35 percent to 21 percent. Smaller companies may be finding not as big a benefit as they originally thought, Afshar said.
Respondents were also concerned about tariffs and trade wars, particularly as to how they could influence the future of the economy and rising interest rates, which affect the housing industry.
Purchases, hirings slowing down
The change in planned purchases businesses intended to make over the next six months has been dropping slowly, Afshar said.
“That is also an indication that they expanded a little too fast early on and then had to adjust accordingly,” Afshar said.
The hiring index over the next six months is still above average, he said, though the number of people who businesses are planning to hire has dropped slowly.