GREATER PHOENIX BLUE CHIP • MARCH 2002

VOLUME 14 • NUMBER 1 • MARCH 2002
........................................................................................... PAGE 1

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

2002 Manufacturers Survey reflects cautious optimism
The 2002 Greater Phoenix Manufacturer’s Survey reflects a degree of pessimism
about business conditions over the last 12
months that has not been seen before in the
nine years of the survey’s history. On the
other hand, the degree of optimism about
the next 12 months is also at a record high.
Thus, while Greater Phoenix manufacturers have been hard hit over the last year
by the events in the economy, they are
quite optimistic that the events are now
behind them.
These conclusions were drawn from
the results of the ninth annual Maricopa
County Manufacturers Survey sponsored
by Arizona State University, Bank One
Economic Outlook Center and the Center
for Business Research. Those surveyed
represent a broad cross section of the manufacturing industry in Greater Phoenix.
Of those surveyed, some 73.5 percent
felt that business conditions in the U.S.
economy compared to 12 months ago were
either moderately or substantially worse.
Some 64.6 percent felt that way about

Greater Phoenix and 62.9 percent felt
that way about their own industry. This is
substantially worse than responses from
a year ago. On the other hand, looking
ahead a year, 75.4 percent believe that
business conditions will be better for the
U.S. economy, 67.9 percent believe they
will be better in Greater Phoenix and 74.0
percent believe conditions will be better in
their own industry.
In terms of demand for a company’s
particular product, some 22 percent have
experienced an increase over the last 12
months, while 54 percent have experienced
a decrease. Looking ahead 12 months, 55
percent expect an increase and only 10
percent expect a decrease. It appears that
manufacturers expect a better employment
picture as well. While 15 percent of the
companies said they increased employment
over the last 12 months, almost 50 percent
indicated that employment decreased in their
company. Over the next 12 months, almost
one-third expect an increase in employment
while slightly less than 10 percent expect a

decline. This is the brightest employment
outlook since the 2000 survey.
The picture for capital expenditures is
more mixed. Only 23 percent of companies
said they increased capital expenditures
over the last year. That compares to more
than 50 percent one year ago. Over the next
12 months, less than 30 percent expect
to increase capital expenditures. This is
the lowest level of future expectations for
capital expenditures in the survey’s history.
Thus, capital spending is likely to remain
anemic in the near-term.
Wage levels have clearly been impacted
by the recession as well. Only 40 percent
of the companies reported an increase
in the wage levels over the last twelve
months, compared to 77 percent in the 2001
survey. Over the next twelve months, only
37 percent expect an increase compared
to 61 percent in the 2001 survey. While
exports were clearly damaged by the
recession (only 20 percent reported an
increase compared to 52 percent one year
(Continued on page 4)

Greater Phoenix shouldered burden of recession's impact
It has become clear that the Greater
Phoenix area has taken a significant hit
from the recession and Sept. 11. Business
spending has suffered the most during
this downturn — and the firms in the area
whose goods and services are exported are
more sensitive to business spending than
to consumer spending. The terrorist attacks
affected air travel and tourism.
However, the news is not all bad. Singlefamily home construction is still at good
levels, and population growth may not slow
to the extent it has in past recessions.
The Greater Phoenix area benefited
greatly during most of the last expansion due
to increased business spending. However,

business spending slowed dramatically
in 2001. The highest profile firms during
the expansion were the semiconductor
manufacturers such as Intel and Motorola.
The market seemed able to absorb whatever
was produced as relatively tight labor
markets and the need to increase productivity drove the relentless automation and
digitalization of just about everything.
Even in good times, semiconductor
manufacturers face periodic problems
because of the long lead times between the
decision to build a plant and its completion. During periods when capacity is
too low, many firms begin the process of
adding capacity. Firms that are first to

bring capacity on line enjoy profits, while
others suffer as prices are driven down
by oversupply. This time, the industry
did not overbuild itself into a problem.
Business customers took a breather after
a sustained buying spree.
The area is heavily dependent on air travel
and business-related tourism. Even before
Sept. 11, air carrier landings (regularly
scheduled passenger flights) were showing
signs of weakness as firms cut back on
business travel in 2001. As of December,
the number of landings was not even close
to pre-Sept. 11 levels — but there were
signs of impending recovery.
— T.C.

BANK ONE ECONOMIC OUTLOOK CENTER • ARIZONA STATE UNIVERSITY

PAGE 2

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

GREATER PHOENIX BLUE CHIP • MARCH 2002

GREATER PHOENIX ECONOMIC FORECAST FOR 2002
ANNUAL PERCENT CHANGE 2002 FROM 2001
PopuSOURCE
lation
Arizona Public Service
2.7
ASU – Bank One Economic Outlook Center 2.9
CH2M HILL
2.7
Department of Economic Security
2.6 L
ECON-LINC
2.6 L
Elliott D. Pollack and Co.
2.7
H.C. Reardon Economics
2.8
Joint Legislative Budget Committee
2.6 L
Lancaster Consulting
2.6 L
The Maguire Company
2.8
Protitlement
2.7
Salt River Project
2.9
U of A – Eller College
2.7
VisionEcon
3.0 H
Consensus
2.7

Personal
Income
5.3
5.8
5.2
4.9
4.6
6.0
5.2
4.5 L
5.4
6.3 H
6.2
5.0
5.9
5.6
5.4

Retail
Sales
3.1
3.5
5.0
4.6
3.8
4.5
4.5
1.0 L
4.7
5.5
6.0
3.0
6.3 H
6.2
4.4

Wage &
Salary
Empl.
0.6
1.4
2.5
(1.5) L
0.2
1.5
2.8
0.0
2.5
3.0
3.1 H
2.0
2.8
2.8
1.7

Manufacturing
Empl.
(2.1)
0.7
(1.0)
(5.8) L
(4.0)
(2.0)
1.0
(3.0)
0.8
1.6
2.0 H
1.0
1.2
2.0 H
(0.5)

AVERAGE RATE FOR 2002

Construction
Empl.
(3.3)
(5.0)
(5.0)
(5.0)
(3.0)
(10.0) L
0.0
(2.0)
(10.0) L
0.0
(6.0)
0.0
(0.3)
4.0 H
(3.3)

Services
Empl.
1.2
3.9
2.2
(1.3) L
3.2
4.0
4.5
1.0
3.6
4.8 H
4.8 H
2.0
3.7
4.5
3.0

National
CPI
2.0
1.5
2.4
3.6 H
2.6
2.5
1.5
1.9
2.0
2.5
2.6
1.4 L
2.7
1.4 L
2.2

Unemployment
Rate
4.9
4.2
4.4
4.5
5.0 H
4.7
4.4
5.0 H
4.0
3.5 L
3.6
3.8
—
3.8
4.3

GREATER PHOENIX ECONOMIC FORECAST FOR 2003
ANNUAL PERCENT CHANGE 2003 FROM 2002

SOURCE
Arizona Public Service
ASU – Bank One Economic Outlook Center
CH2M HILL
Department of Economic Security
ECON-LINC
Elliott D. Pollack and Co.
H.C. Reardon Economics
Joint Legislative Budget Committee
Lancaster Consulting
The Maguire Company
Protitlement
Salt River Project
U of A – Eller College
VisionEcon
Consensus

Population

Personal
Income

Retail
Sales

Wage &
Salary
Empl.

Manufacturing
Empl.

2.7
2.6
2.7
2.6
2.7
2.6
2.8
2.5 L
2.5 L
2.9
2.8
2.8
2.7
3.2 H
2.7

6.3
6.4
6.1
5.9
5.2 L
7.2
7.4
6.0
6.0
6.5
7.5
5.5
5.7
8.5 H
6.4

4.6
5.1
5.6
5.4
5.0
5.5
6.8
4.0 L
5.2
6.0
7.2
4.0 L
7.7
10.9 H
5.9

2.8
2.8
2.7
2.2 L
2.2 L
3.8
3.5
2.5
3.0
3.0
3.6
3.0
2.7
4.4 H
3.0

0.3
1.7
1.0
1.4
1.5
3.0
2.2
0.0 L
2.2
1.5
2.5
2.0
2.0
3.5 H
1.8

AVERAGE RATE FOR 2003

Construction
Empl.
1.2
1.0
5.0
(0.9)
0.0
3.0
0.0
1.0
2.5
0.0
(4.0) L
1.0
(0.3)
7.4 H
1.2

Services
Empl.

National
CPI

3.3
4.5
3.0 L
3.2
3.8
5.0
5.0
3.2
4.0
5.0
5.2
3.5
3.4
6.0 H
4.2

2.8
2.7
2.8
3.4 H
2.9
2.8
2.4 L
2.6
2.8
2.5
2.8
2.4 L
2.7
3.0
2.8

Unemployment
Rate
4.2
3.7
4.7 H
3.9
4.2
4.2
4.2
4.0
3.8
3.5
3.4
3.3 L
3.5
3.9

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

SOURCE
2001
Percent Change
2000
Percent Change
1999
Percent Change
*Estimated

Population
(thousands)
3,196
3.2
3,097
3.4
2,995
3.6

Personal
Income
(millions)
91,907*
5.9*
86,786*
7.1*
81,033
7.7

Retail
Sales
(millions)
30,605
1.5
30,167
8.4
27,825
10.4

Wage &
Salary
Empl.
(thousands)
1,557.2
0.8
1,544.6
3.9
1,487.0
4.8

Manufacturing
Empl.
(thousands)
155.8
-3.9
162.2
0.4
161.6
-3.1

Construction
Empl.
(thousands)
119.7
1.5
117.9
4.8
112.5
7.8

Services
Empl.
(thousands)
507.9
-0.8
512.0
5.5
485.3
8.8

National
CPI
177.1
2.8
172.2
3.4
166.6
2.2

Unemployment
Rate
3.8
2.6
3.0

GREATER PHOENIX BLUE CHIP • MARCH 2002

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

BANK ONE ECONOMIC OUTLOOK CENTER • CENTER FOR BUSINESS RESEARCH

2002 SURVEY OF MARICOPA COUNTY MANUFACTURERS
Percent of Responses
Substantially
Better

Moderately
Better

Same

Moderately
Worse

Substantially
Worse

2002
2001
2000

1.1%
4.6
5.4

12.0%
22.4
41.2

13.5%
29.6
41.0

52.4%
40.8
12.3

21.1%
2.6
0.0

(b) for the Metro Phoenix economy:

2002
2001
2000

0.7%
7.8
9.4

9.9%
24.0
38.6

24.8%
44.2
43.6

48.9%
22.7
7.9

15.7%
1.3
0.5

(c) for your own industry:

2002
2001
2000

1.8%
8.5
9.9

15.6%
29.4
38.1

19.6%
25.5
32.7

34.9%
29.4
17.8

28.0%
7.2
1.5

2002
2001
2000

5.1%
1.3
5.0

70.3%
20.9
22.9

17.4%
33.3
46.3

5.8%
39.9
25.9

1.5%
4.6
0.0

(b) for the Metro Phoenix economy:

2002
2001
2000

5.5%
0.7
7.0

62.4%
27.3
25.1

24.5%
42.2
55.3

6.2%
27.9
12.6

1.5%
2.0
0.0

(c) for your own industry:

2002
2001
2000

9.2%
2.6
8.9

64.8%
28.6
31.7

15.4%
34.4
40.1

7.7%
31.2
17.8

2.9%
3.3
1.5

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

2002
2001
2000

22.1%
56.1
53.8

23.9%
23.2
31.2

54.0%
20.7
14.6

0.0%
0.0
0.5

2002
2001
2000

54.9%
40.8
54.2

28.0%
34.2
33.0

9.5%
19.1
10.3

7.6%
5.9
2.5

2002
2001
2000

14.9%
41.9
37.7

36.2%
41.3
48.8

48.9%
16.8
13.5

0.0%
0.0
0.0

2002
2001
2000

32.4%
30.3
45.1

54.2%
52.6
46.1

9.5%
15.1
6.8

4.0%
2.0
1.9

2002
2001
2000

23.3%
50.3
48.8

37.1%
36.8
40.6

38.9%
12.9
10.6

0.7%
0.0
0.0

2002
2001
2000

29.7%
36.0
47.8

39.9%
38.0
41.0

25.3%
24.7
9.8

5.1%
1.3
1.5

PAGE 4

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

Percent of Responses

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:

8.) When do you expect the recession to end...
(a) for the nation?
(b) for the state?
(c) for your industry?

(Continued from page 1)
ago), the next 12 months hold more promise.
About 38 percent expect an increase over
the next year.
This year’s special question had to do with
when respondents thought the recession
would end. About 25 percent believe that
the national recession will end in the second
quarter of this year. Another 20 percent

GREATER PHOENIX BLUE CHIP • MARCH 2002

Increase(d)

Remained
the same

2002
2001
2000

40.4%
77.4
77.9

48.7%
21.3
20.7

10.6%
1.3
1.4

0.4%
0.0
0.0

2002
2001
2000

37.2%
61.2
71.8

54.7%
34.2
27.2

5.1%
2.6
1.0

2.9%
2.0
0.0

2002
2001
2000

20.0%
52.3
42.4

49.1%
35.4
45.7

27.3%
7.7
8.7

3.6%
4.6
3.3

2002
2001
2000

37.6%
40.0
54.3

45.0%
49.2
33.7

11.0%
4.6
8.7

6.4%
6.2
3.3

2002 Q2
24.4%
24.1
30.2

2002 Q3
19.8%
20.3
17.1

2002 Q4
8.3%
13.4
8.6

2003 Q1
30.2%
24.6
26.1

believe it will end in the third quarter and 30
percent believe that the national recession
will not end until the beginning of 2003.
There was slightly more optimism about the
state. For Arizona, 24 percent expect the
recession to end in the second quarter, 20
percent in the third quarter and 25 percent in
the first quarter of 2003. Overall, it appears
that the bulk of the respondents believe the

Decrease(d)

Don't
know

Other
17.4
17.7
18.0

recession will approach its end by about
mid-2002.
Overall, the results of the survey are in
line with forecasts of a moderate pickup
in economy this year. Manufacturers are
optimistic about the future, although capital
expenditures are likely to remain anemic
for a while longer.
– E.P.

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

Communities Southwest
Steve Pritulsky

Elliott D. Pollack and Co.
Elliott Pollack

Arizona Public Service Co.
Pete Ewen and Brian Cary

ECON-LINC
John Lucking

Salt River Project
Arlyn Herrera, Rebecca Holmes and Karen Wolfe

Arizona State University,
Bank One Economic Outlook Center
Tracy Clark

H. C. Reardon Economics
Hank Reardon

University of Arizona, Eller College
Marshall Vest

Joint Legislative Budget Committee
Staff

Lancaster Consulting
Dwight Duncan

The Maguire Co.
Alan Maguire

Vision Econ
Debra J. Roubik

CH2M Hill
Kent Ennis

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

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Outlook Center at (480) 965–5543.
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