GREATER PHOENIX BLUE CHIP • FEBRUARY 2001

VOLUME 13 • NUMBER 1 • FEBRUARY 2001
........................................................................................... PAGE 1

™

B
L U E • C H I P • E C O N O M I C • F O R E C A S T
.........................................................................................................................................................

Manufacturers survey reveals declining optimism for 2001
The 2001 Greater Phoenix Manufacturers Survey reflects a less optimistic view
of the economy than at any time since the
annual survey was begun in 1994. The
less-than-sunny outlook applies to the U.S.
and local economies, as well as prospects
for the participants' own businesses.
These conclusions were drawn from
the results of the eighth Maricopa County
Manufacturers Survey co-sponsored by
RSM McGladrey Inc., the Bank One
Economic Outlook Center and ASU's
Center for Business Research. Those
surveyed represent a broad cross-section
of the manufacturing industry in Greater
Phoenix.
It is not surprising that the 2001 survey
results were almost uniformly less optimistic than any time in the survey’s eightyear history, given the fact that during
most of that period the economy was
extremely strong.
For the 12-month period just ended, more
than 43 percent of the respondents indicated
that the economy was worse or substantially

worse than it was in the previous 12 months.
This compares to only 12.3 percent who
thought so when asked the same question
in the 2000 survey. Only 27 percent in this
year's survey believed the economy was
moderately or substantially better, compared
to 46.6 percent a year ago.
As for the Greater Phoenix economy, 24
percent thought the economy was worse
off than a year ago, compared to only
8.4 percent in the 2000 survey. For their
own industry, about 36 percent believe the
business conditions are currently worse,
compared to only 19 percent who felt that
way a year ago.
In terms of expectations over the next
year, the outlook has also deteriorated.
In looking ahead 12 months, almost 45
percent believe that the United States
economy will be worse than it is today
compared to only 26 percent a year ago.
Interestingly, some 22 percent still believe
the economy will be better a year from
now, compared with about 28 percent who
believed so a year ago.

As for the Metro Phoenix economy,
the outlook is less optimistic this year.
Some 28 percent of respondents believe
the economy will improve in 2001, while
30 percent think the economy will worsen.
This compares with 32 percent and 12.6
percent respectively in the 2000 survey.
Survey participants were also less optimistic about the outlook for their industry:
more than a third believe business will be
worse this year, compared to only about
19 percent in last year's survey.
Still, while expectations are lower than
they were a year ago, there remains a
substantial percentage of manufacturers
who believe things will improve. Indeed,
56 percent have seen demand for their
products increase over the last 12 months.
This is in line with results of the last two
years. Only 21 percent have seen demand
decrease. Looking ahead 12 months, some
41 percent expect demand for their product
to increase — down from 54 percent a
year ago.
(Continued on page 4)

Greater Phoenix is in good shape to weather downturn
The panel members have not changed
their forecasts significantly despite the
drumbeat of negative economic news at
the national level. The panel had already
forecast slower growth in 2001, and recent
developments apparently have not made
much difference. The outlook for 2002
is remarkably similar to 2001, which
suggests that the majority opinion favors
a slowdown but not a recession — at least
over the next two years.
The slowdown, if it plays out as the panel
expects, should allow the local economy
to bounce back quickly when the national
economy re-accelerates. It is clear that the
Greater Phoenix area will be affected by a

national slowdown, but job growth in the 3
percent range should be enough to keep us
at or near the top compared to other large
metropolitan areas. The difference going
into the current slowdown is that the local
economy is not significantly out of balance
as it was during the last several expansions.
The reason may be lingering memories
of the real estate downturn during the
late '80s, which prevented the irrational
exuberance of the stock market from
spreading to the real estate market.
Layoffs both nationally and locally have
not warranted much concern to date, based
on past cycles. However, the behavior of
firms and consumers could be different this

time around. Firms have shown an unusual
willingness to lay off workers in the current
expansion; they may begin to shed workers
faster, or in greater numbers, than expected.
Consumers, who have not experienced a
real economic slowdown or recession in a
long time, may react strongly.
The bottom line is that the nation appears
to be headed into an economic slowdown
rather than a recession, based on past
cycles. However, the possibility of a recession is much greater than it has been in
a long time. Greater Phoenix is likely to
fare better than the nation as a whole, but a
national slowdown will be felt locally.
— T.C.

BANK ONE ECONOMIC OUTLOOK CENTER • ARIZONA STATE UNIVERSITY

PAGE 2

...........................................................................................

GREATER PHOENIX BLUE CHIP • FEBRUARY 2001

GREATER PHOENIX ECONOMIC FORECAST FOR 2001
ANNUAL PERCENT CHANGE 2001 FROM 2000

SOURCE
Arizona Public Service
ASU – Bank One Economic Outlook Center
Communities Southwest
Department of Economic Security
ECON-LINC
Elliott D. Pollack and Co.
H. C. Reardon Economics
Joint Legislative Budget Committee
Lancaster Consulting
The Maguire Company
Salt River Project
U of A – Eller College
VisionEcon
2001 Consensus

Population
2.9
2.7
2.8
2.7
2.7
2.8
2.8
3.1H
2.7
2.8
2.9
2.8
2.6L
2.8

Personal
Income
6.8
6.0L
6.4
7.3H
6.4
7.0
6.0L
6.6
6.0L
6.6
6.4
6.7
6.7
6.5

Retail
Sales
6.0
5.8
5.5
6.4
5.6
6.0
5.8
5.4
5.0
5.7
6.0
3.6L
7.6H
5.7

Wage &
Salary
Empl.
3.6
3.3
3.2
4.0H
3.2
3.2
3.6
3.3
3.1L
3.6
4.0H
3.2
3.1L
3.4

Manufacturing
Empl.
1.2
1.0L
1.6
2.4H
1.0L
1.0L
1.5
2.0
1.0L
1.8
1.0L
2.1
1.9
1.5

AVERAGE RATE FOR 2001

Construction
Empl.
(2.5)
(4.0)
(5.0)
1.4
(8.0)
(10.0)L
(5.0)
(2.9)
(5.0)
0.0
0.0
(2.9)
2.0H
(3.3)

Services
Empl.
4.3L
5.0
4.6
5.6
4.4
5.0
5.5
4.4
4.5
4.8
6.0H
4.5
5.5
5.0

National
CPI
2.4
2.7
2.7
2.5
2.6
2.5
2.7
3.1H
2.4
2.3L
2.5
2.5
2.8
2.6

Unemployment
Rate
3.4
3.3
3.4
3.0L
3.4
3.1
3.5
3.9H
3.9H
3.5
3.1
—
3.2
3.4

GREATER PHOENIX ECONOMIC FORECAST FOR 2002
ANNUAL PERCENT CHANGE 2002 FROM 2001

SOURCE
Arizona Public Service
ASU – Economic Outlook Center
Communities Southwest
Department of Economic Security
ECON-LINC
Elliott D. Pollack and Co.
H. C. Reardon Economics
Joint Legislative Budget Committee
Lancaster Consulting
The Maguire Company
Salt River Project
U of A – Eller College
VisionEcon
2002 Consensus

Population
2.8
2.6
2.7
2.6
2.8
2.7
2.8
2.8
2.5L
2.7
2.6
2.6
3.0H
2.7

Personal
Income
6.4
5.8L
6.2
6.6
6.4
5.0
6.0
4.9
5.8L
6.3
6.0
5.9
8.6H
6.4

Retail
Sales
5.9
5.0
6.0
6.5
6.4
5.0
6.0
4.9
4.5L
6.0
6.0
5.7
9.3H
5.9

Wage &
Salary
Empl.
3.3
2.8
3.0
3.6
3.5
3.0
3.7H
2.8
2.7L
3.4
3.7H
2.7L
3.4
3.2

Manufacturing
Empl.
1.0
0.7L
1.4
2.5H
2.0
2.0
2.0
1.7
0.7L
1.6
1.0
1.8
0.9
1.5

AVERAGE RATE FOR 2002

Construction
Empl.
(3.5)
(5.0)
(5.0)
(3.9)
(4.0)
(10.0)L
0.0
(4.0)
(10.0)L
0.0
0.0
(3.2)
4.0H
(3.4)

Services
Empl.
4.1
4.5
4.8
5.2
5.0
5.0
6.0H
3.3L
4.1
4.8
5.0
3.7
5.9
4.8

National
CPI
2.3L
2.5
2.6
2.8H
2.3L
2.5
2.6
2.6
2.5
2.3L
2.5
2.4
2.3L
2.5

Unemployment
Rate
3.5
3.7
3.6
3.2L
3.2L
3.3
3.6
4.5H
4.2
3.5
3.3
—
3.5
3.6

Data sources for Maricopa County (Greater Phoenix area): population, Arizona Department of Economic Security; personal income, Bureau of Economic
Analysis; retail sales, Arizona Department of Revenue; wage and salary employment, manufacturing employment, construction employment, service employment
and unemployment rate,

GREATER PHOENIX HISTORICAL DATA
Population
SOURCE
(thousands)
2000
2,966t
Percent Change
2.9
1999
2,882
Percent Change
3.1
1998
2,794
Percent Change
3.3
* Estimated
t Preliminary

Personal
Income
(millions)
$81,769*
7.1
81,711*
7.7
75,869
9.7

Retail
Sales
(millions)
$27,846*
7.4
27,825
10.4
25,207
7.9

Wage &
Salary
Empl.
(thousands)
1,553.1t
4.4
1,487.2
4.8
1,418.8
5.5

Manufacturing
Empl.
(thousands)
162.7t
0.6
161.8
-2.9
166.7
5.2

Construction
Empl.
(thousands)
115.5t
2.8
112.3
7.6
104.4
11.8

Services
Empl.
(thousands)
518.1t
6.6
486.2
9.0
446.2
5.2

National
CPI
172.2
3.4
166.6
2.2
163.0
1.6

Unemployment
Rate
2.5t
3.0
2.6

GREATER PHOENIX BLUE CHIP • FEBRUARY 2001

........................................................................................... PAGE 3

BANK ONE ECONOMIC OUTLOOK CENTER • RSM McGLADREY INC. • CENTER FOR BUSINESS RESEARCH

2001 SURVEY OF MARICOPA COUNTY MANUFACTURERS
Percent of Responses
Substantially
Better

Moderately
Better

Same

Moderately
Worse

Substantially
Worse

2001
2000
1999

4.6%
5.4
5.4

22.4%
41.2
33.0

29.6%
41.0
30.8

40.8%
12.3
23.8

2.6%
0.0
7.0

(b) for the Metro Phoenix economy:

2001
2000
1999

7.8%
9.4
6.6

24.0%
38.6
37.9

44.2%
43.6
35.2

22.7%
7.9
15.9

1.3%
0.5
4.4

(c) for your own industry:

2001
2000
1999

8.5%
9.9
10.3

29.4%
38.1
33.0

25.5%
32.7
22.2

29.4%
17.8
21.6

7.2%
1.5
13.0

2001
2000
1999

1.3%
5.0
1.1

20.9%
22.9
21.3

33.3%
46.3
40.4

39.9%
25.9
34.4

4.6%
0.0
2.7

(b) for the Metro Phoenix economy:

2001
2000
1999

0.7%
7.0
1.7

27.3%
25.1
27.8

42.2%
55.3
45.6

27.9%
12.6
23.3

2.0%
0.0
1.7

(c) for your own industry:

2001
2000
1999

2.6%
8.9
4.9

28.6%
31.7
30.6

34.4%
40.1
37.2

31.2%
17.8
24.6

3.3%
1.5
2.7

1) How do you rate present business conditions
as compared with 12 months ago?
(a) for the U.S. economy:

2) Looking ahead 12 months from now,
do you think business conditions will be:
(a) for the U.S. economy:

The following questions address the economic environment of individual companies
over the past 12 months and their forecasts for the next 12 months:
Percent of Responses

3) Demand for your own company’s product or service:
(a) over the past 12 months:

(b) for the next 12 months:
4) Employment at your own company:
(a) over the past 12 months:

(b) for the next 12 months:

5) Capital expenditures at your company:
(a) over the past 12 months:

(b) for the next 12 months:

Increase(d)

Remain(ed)
the same

Decrease(d)

Don’t
Know

2001
2000
1999

56.1%
53.8
56.6

23.2%
31.2
20.6

20.7%
14.6
22.3%

0.0%
0.5
0.6

2001
2000
1999

40.8%
54.2
51.1

34.2%
33.0
27.8

19.1%
10.3
15.6

5.9%
2.5
5.6

2001
2000
1999

41.9%
37.7
37.0

41.3%
48.8
41.3

16.8%
13.5
21.7

0.0%
0.0
0.0

2001
2000
1999

30.3%
45.1
39.1

52.6%
46.1
46.2

15.1%
6.8
10.9

2.0%
1.9
3.8

2001
2000
1999

50.3%
48.8
43.2

36.8%
40.6
37.8

12.9%
10.6
18.9

0.0%
0.0
0.0

2001
2000
1999

36.0%
47.8
39.3

38.0%
41.0
37.7

24.7%
9.8
20.2

1.3%
1.5
2.7

PAGE 4

...........................................................................................

MANUFACTURERS SURVEY (continued)
6) Wage/salary levels at your own company:
(a) over the past 12 months:

(b) for the next 12 months:

7) Exports of your company’s product or service:
(a) over the past 12 months:

(b) for the next 12 months:

The employment outlook can be interpreted
in a positive light. Some 42 percent indicated
that they have increased employment over
the last 12 months, up slightly from about 38
percent a year ago. About 17 percent indicated
that employment has decreased, compared to
about 14 percent a year ago. More importantly,
30 percent still anticipate an increase in
employment this year, while 15 percent expect
a decline in employment. This is down from 45
percent and 7 percent, respectively, from last
year’s survey; however, these responses are
believed to be more indicative of a slowdown

GREATER PHOENIX BLUE CHIP • FEBRUARY 2001

Percent of Responses
Increase(d)

Remained
the same

Decrease(d)

Don't
know

2001
2000
1999

77.4%
77.9
69.6

21.3%
20.7
28.3

1.3%
1.4
2.2

0.0%
0.0
0.0

2001
2000
1999

61.2%
71.8
58.6

34.2%
27.2
36.5

2.6%
1.0
1.7

2.0%
0.0
3.3

2001
2000
1999

52.3%
42.4
31.7

35.4%
45.7
36.6

7.7%
8.7
28.7

4.6%
3.3
3.0

2001
2000
1999

40.0%
54.3
42.2

49.2%
33.7
40.2

4.6%
8.7
10.8

6.2%
3.3
6.9

in the economy than any absolute decline. The
same is true regarding capital spending, where
36 percent of respondents said they expect
capital spending to increase.
This year's special questions had to do with
usage of the Internet and other electronic
interfaces. Approximately 24 percent of
those responding indicated that they get 10
percent or more of their sales from Internet
transactions, while one-third indicated that
they purchased more than 10 percent of their
goods over the Internet.
Some 62 percent of those responding

indicate that they track more than 10 percent
of their manufacturing process electronically, and more than 57 percent have made
a significant investment in their electronic
systems over the last year.
Overall, the results of the survey are in
line with forecasts that the U.S. economy
is in a period of slower growth and may be
headed into a recession. However, it appears
that local manufacturers are more optimistic
than their national counterparts — albeit less
so than they have been in recent years.
– E.P.

ECONOMIC FORECAST PANEL
Arizona Department of Economic Security
Dan Anderson and Donald Wehbey

ECON-LINC
John Lucking

Arizona Public Service Co.
Pete Ewen and Brian Cary

H. C. Reardon Economics
Hank Reardon

Arizona State University,
Bank One Economic Outlook Center
Tracy Clark

Joint Legislative Budget Committee
Kent Ennis

Communities Southwest
Steve Pritulsky

Bank One Economic
Outlook Center
Tracy L. Clark, Economics Editor
Elliott Pollack, Topics Editor
Nancy A. Maneely, Editorial Coordinator
Laura Carr, Graphic Designer

The Maguire Co.
Alan Maguire
Elliott D. Pollack and Co.
Elliott Pollack

Salt River Project
Arlyn Herrera, Rebecca Holmes
and Karen Wolfe
University of Arizona, Eller College
Marshall Vest
Lancaster Consulting
Dwight Duncan
Vision Econ
Debra J. Roubik

GREATER PHOENIX BLUE CHIP (ISSN 1042-6825) is published
four times a year by the Bank One Economic Outlook Center,
an afliate of the L. William Seidman Research Institute in the
College of Business at Arizona State University. The annual
rate is $39. For information, call the Bank One Economic
Outlook Center at (480) 965–5543.
Arizona State University vigorously pursues afrmative action and
equal opportunity in its employment, activities and programs.
• Not Printed or Mailed at State Expense •

Ira Feldman, Director