Economic Outlook & Labour Legislation Survey

Detailed Findings on Sections Addressing
Business Performance and the General Economic Outlook

Prepared by the Nassau Tourism & Development Board for
The Coalition of Private Sector Organizations
July, 2002

I. Background

This report is based on a survey of businesses conducted during the month of June by the Coalition of Private Sector Organizations, an umbrella group of private sector organizations.

This report provides details of business responses with regard to those questions addressing business performance and the general economic outlook. The objectives of the survey with regard to these sections were as follows:

• To measure the extent to which changes in the economy have affected employment, sales, pricing, profits and capital spending;

• To provide an indication of business confidence in the near future and the mid-term and their outlook regarding employment, sales, pricing, profits and capital spending.

II. Detailed Findings

A. BUSINESS PERFORMANCE Past Six Months and Projections Next Six Months

1. Employment

Most Employers Have Held the Line on Reducing Employment

• 60% of businesses have not reduced the number of workers over the past six months
• While 40% have reduced their workforce, only 8% reduced it significantly

One-Third of Employers Will Reduce Workforce Over Next Six Months; 4% Project Employment to Be Down Significantly

• 34% plan to reduce their workforce over the next six months, 4% will be down significantly
• 10% of employers will take on additional employees

2. Sales

Almost Two-Thirds of Businesses Report Sales are Down

• 65% of businesses report sales are down the past six months
• One-third of businesses indicate sales are down significantly
• 19% of businesses report that sales are up, with 3% reporting they are up significantly

Sales Projected to Continue to Be Down; # Projecting Higher Sales Increases Slightly

• 47% of businesses report sales will continue to be down
• 24% anticipate sales will increase, 3% indicate they will increase significantly

3. Profits

Profits Take a Dive for Most Businesses

• 64% report profits down the past six months, 31% say they are down significantly
• 13% report profits are up

Just Over Half Expect Profits to Be Down Next Six Months; Small Improvement in Those Anticipating Upturn

• 51% project profits to be down next six months
• 20% expect profits to be up next six months
• Remainder Expect Continuation of Same

More Than Two Out of Every 10 Businesses Anticipate a Net Loss This Year

• 22% anticipate a net loss
• 77% anticipate a net profit, 1% should break even

Those Anticipating a Profit Project It Will Be Lower Than Expected

• 64% will see lower profits
• 11% expect higher profits than anticipated

4. Capital Spending

More Than Half of Businesses Reduced Capital Spending - 26% Report Spending Down Significantly

• 56% report capital spending Is down
• 22% increase capital spending, 2% up significantly

Businesses Cautious About Increasing Capital Spending

• 51% report it will be down over the next six months
• 20% plan to increase capital spending, 1% up significantly

5. Pricing

Competitive Factors, Sluggish Sales Force Some Businesses to Reduce Prices

• One-third of businesses report reducing some prices
• 25% anticipate reducing prices over the next six months

Increased Costs Force Some Businesses to Increase Prices

• 18% of businesses have raised prices in the past six months
• 19% plan to increase prices over the next six months

B. GENERAL ECONOMIC OUTLOOK

1. Economic Recovery

Nearly Two-Thirds of Employers Believe Economy is Recovering

• 65% think The Bahamas' economy is recovering
• 35% believe the economy is not yet recovering

2. Impact of September 11th

Most Employers Believe Bahamas is Still Feeling Impact of September 11th

• 85% of businesses indicate September 11th is still impacting our economy

3. Impact from Financial Services Changes

Most Employers Indicate Changes in Financial Services Sector Have Negatively Impacted the Economy and Will Continue to Do So

• 91% believe Bahamas' economy has been impacted negatively over past 12 months
• 85% believe economy will continue to be impacted negatively over next 12 months

III. CONCLUSIONS

Based upon a review and analysis of the survey findings in these areas, The Coalition of Private Sector Organizations offers the following conclusions:

1. The overall economy of The Bahamas, while showing very marginal signs of rebounding, remains highly vulnerable and any marginal gains can easily be reversed.

2. Business confidence is not high with most in a restraint mode with regard to capital spending, a clear indicator of future economic activity. Based upon submitted comments, a 'wait and see' attitude appears to be prevailing for most businesses.

3. The number of businesses reporting a net loss for the year (22%) and those posting a profit lower than anticipated (64%) is especially troubling. This indicates that many businesses do not have the capacity to absorb an additional shock, having little or no equity reserves.

4. The fragility of the economy and of business confidence is underscored by the fact that sales and profit projections were already adjusted downward by most businesses a year ago and fell even lower than those downward projections. In a similar survey conducted by the Coalition of Private Sector Organizations in August, 2001, 51% of the businesses anticipated a decline in profits, 31% expected them to remain the same, and 18% projected an increase.

5. While some businesses have reduced employment levels slightly and others are planning some reductions, most businesses are holding the line on making significant reductions in their employment levels. It is assumed that this is being done in anticipation of employments needs upon recovery and at the expense of profits and capital spending.

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