Capital One Bank, a local banking partner with more than 175 branches in Texas, today released the results of its quarterly "Market Pulse" survey gauging the economic outlook of local businesses and consumers. Survey results for the first quarter of 2011 suggest that a growing number of small and large businesses in Texas report stronger financial performance and their economic outlook is increasingly optimistic.

Despite these encouraging signs, the survey for the first quarter does not indicate a growth in hiring plans for area business in the near-term. On the consumer side, local residents are optimistic about local business conditions but report no improvement in personal finances.

"Our survey results suggest that many Texas businesses are seeing modest improvements in economic conditions and slightly stronger business performance. Our results also suggest that access to credit and financing continues to improve, which should allow businesses to look ahead to future growth opportunities with greater confidence," said Cynthia Calapa Graham, Rio Grande Valley Market President for Capital One Bank. "While businesses are showing signs of optimism, most are not yet planning to make significant investments in their business or hire new personnel. The measured pace of employment certainly tempers the overall economic outlook, and we're looking to that as a pivotal sign for growth both here and across the country."

Business outlook

Most Texas businesses believe economic conditions are stable or improving.

The majority (59 percent) of large businesses polled say that economic conditions for their business are improving, consistent with results from the fourth quarter of 2010 but 12 percentage points higher on a year-over-year basis. Thirty-six percent of large businesses report stable conditions.

Similarly, 45 percent of small businesses in Texas say that economic conditions are improving. Only 12 percent of small businesses surveyed believe conditions are getting worse, down 10 percentage points from the fourth quarter of 2010 but consistent with results from the first quarter of 2010.

Many large and small businesses in Texas report that financial performance has improved over the past year.

Sixty-two percent of large business managers surveyed say that their firm's financial position is better than it was 12 months ago, up 10 percentage points from last quarter and 13 percentage points higher year-over-year.

Of the small businesses surveyed, almost half (47 percent) report that their financial position is better than it was last year, an increase of nine percentage points from the fourth quarter of 2010. Only 11 percent of small businesses report deteriorated finances in the first quarter of 2011, compared to 21 percent in the fourth quarter of 2011.

Most small and large businesses in the state continue to hold off on hiring and plan to keep business development and investment spending steady in the near-term.

Consistent with results from the fourth quarter of 2010, 40 percent of large business respondents and 30 percent of small business respondents report plans to add employees to the payroll over the next six months.

On the investment side, 27 percent of large businesses have plans to increase spending on business development and investments over the next six months, but 69 percent plan to hold spending at current levels. For small businesses, there was a modest uptick in the percentage planning to increase business development and investment spending, up eight percentage points from the fourth quarter of 2010 to 26 percent in the first quarter of 2011.

Access to credit and financing continues to improve for Texas businesses.

Ninety-three percent of large businesses surveyed say that they are currently able to access the credit or financing they need.

For small businesses, 87 percent say that they are able to access credit, an increase of 15 percentage points from the fourth quarter of 2010 and nine percentage points year-over-year.

Small Business focus

Capital One Bank took a closer look at Texas small business leaders' perceptions and plans for future growth as they compare to results from Capital One's Small Business Barometer, a national small businesses survey. In the first quarter of 2011, Texas small businesses had similar views on economic conditions, their firms' financial position, credit conditions, hiring, and spending on investments and business development as the national sample.

Thirty percent of small businesses polled in Texas plan to add employees to the payroll in the next six months compared to 29 percent nationally.

Consistent with national results, 61 percent of small businesses in the state expect 2011 business performance will be better than in 2010.

Capital One Bank also asked local businesses about their marketing strategy, including their use of new media. Key findings include:

Sixty-two percent of Texas small businesses use newspaper or other print ads and 22 percent use online ads. Sixteen percent of local businesses say they market through Facebook and/or Twitter and only one percent are using social couponing like Groupon or Living Social. Texas small businesses are also using radio (17 percent) or TV (15 percent) for marketing. Traditional networking is also a popular marketing tool among small business owners - 58 percent of businesses polled currently use this tactic to market their business.

Finally, Capital One Bank polled small businesses about the pressures they anticipate on their business over the next six months. The survey found that rising fuel prices and competitive activity are major concerns for many Texas small businesses.

One-third (33 percent) of Texas small businesses say that they expect fuel prices will place "extreme" or "quite a lot" of pressure on their business over the next six months. In addition, one quarter (26 percent) of respondents believe activity from competitors will place "quite a lot" or "extreme" pressure on their business in the near term.

Local small businesses are much less concerned about pressure from cash flow issues, price margins and profitability, interest rates and timing of customer payments.

"Our survey results for the first quarter suggest that Texas small businesses are somewhat more confident about business financials and the state of the economy relative to previous quarters, but job creation remains low," said Cynthia Calapa Graham, Rio Grande Valley Market President for Capital One Bank. "As local small business lenders, we encourage area small businesses to plan ahead by talking to a banker about financing and cash flow options, particularly as they anticipate potential pressures coming in the months ahead."

Consumer outlook

Most Texas consumers continue to report a challenging local job market, but many suggest they are optimistic about local business conditions.

In Capital One Bank's survey for the first quarter of 2011, 45 percent of Texans polled believe that jobs are "hard" or "nearly impossible" to find. This number decreased from 57 percent in the fourth quarter of 2010. Most of this change can be explained by a jump in the percentage of consumers who say they are uncertain about the shape of the job market. Consistent with the fourth quarter of 2010, 35 percent of respondents say that jobs are currently "easy to find" or "can be found with effort."

Forty-three percent of survey respondents believe that local business conditions are "excellent" or "good." About the same percentage (40 percent) believe that conditions are "only fair." While these results are consistent with survey results over the past year, the percentage of consumers reporting "poor" business conditions declined seven percentage points from the fourth quarter of 2010 to 12 percent.

Most Texas consumers report no improvement in their personal financial situation over the past year, but their personal savings are steady.

Forty-six percent of consumers surveyed report that their finances have held steady and 19 percent of Texans say that their finances have improved compared to one year ago. However, one-third (34 percent) of survey respondents say that their personal financial situation is worse than it was one year ago. These results are consistent with those from previous quarters.

Consistent with previous quarters, 40 percent of Texas consumers surveyed say that their amount of savings is about the same as it was six months ago. One-third (34 percent) of consumers surveyed report that the amount they have in savings has declined during the past six months. This number has remained consistent since the first quarter of 2010.

Survey Methodology

Consumer Survey

The findings reported in this release are from a telephone survey conducted by the opinion research firm Braun Research of Princeton, NJ. Braun Research completed 400 interviews with Texas resident adults age 18 and over. All interviews were conducted by telephone with one household member only selected at random. The interviews were conducted from March 12-23, 2010. The margin of error is 4.9 percentage points for each group at the 95% confidence level. Interviews were monitored at random. Sampling for each study was conducted using a national probability replicate sample for each state. All interviews were conducted using a computer-assisted telephone interviewing system. Statistical weights were designed from the United States Census Bureau statistics.

Business Survey

The findings reported in this release are from a telephone survey conducted by the opinion research firm Braun Research of Princeton NJ. Braun Research completed 500 interviews with owners or managers of Texas for-profit businesses in two strata defined as those under $10 million in annual revenue (300 total interviews) and those over $10 million or more in revenue (200 interviews) as reported by the respondent. In addition, 1,903 interviews were conducted with a nationally-representative sample of for-profit small businesses, weighted to Dunn and Bradstreet counts of all businesses nationwide by employee size and geography. All interviews were conducted by telephone at their places of business. One respondent per business was conducted. The interviews were conducted from March 11-29, 2011. The margin of error is 2.3 percentage points at the 95% confidence level for the national study and +/-4.37% at the local level. Interviews were monitored at random. Sampling for this study was conducted using a national sample of businesses drawn from InfoUSA. All interviews were conducted using a computer-assisted telephone interviewing system. Statistical weights were designed from the United States Department of Commerce to ensure proper inclusion of all codes.