DALLAS - 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 second quarter of 2011 found that more than two-thirds of the large business and half of the small businesses in the state report that their businesses have improved since the same time last year. The survey findings suggest that large businesses are looking to take advantage of growth opportunities, including hiring and increasing spending on business development and investments.

Most local small businesses, however, continue to show caution when it comes to spending and plan to hold off on hiring and keep business development and investments at current levels for the near-term.

Texas consumers are reporting a less optimistic view as they continue to find a difficult job market and no improvement in their personal financial situation over the past year.

"Our survey results this quarter and last suggest that many large and small businesses in Texas are seeing some continued improvement in financial performance and view of the economy is generally positive," said Kent Eastman, Texas State President for Capital One Bank. "It is encouraging to see that many businesses, particularly large businesses in the state, are preparing for near-term growth, and looking to hire new employees. As businesses look ahead to the rest of the year, we encourage them to take advantage of their banking relationship to discuss financing and cash flow, as well as to prepare for potential growth opportunities and challenges that might arise in the coming months."

Business outlook

Most Texas businesses believe economic conditions are stable or improving.

The majority (63 percent) of large businesses polled in the second quarter of 2011 say that economic conditions are improving. This number is consistent with results from the first quarter of 2011, but is 27 percentage points higher year-over-year. Another 30 percent of the large businesses surveyed report stable conditions.

Small businesses in Texas are similarly optimistic, with 43 percent reporting that economic conditions are improving and 47 percent reporting stable conditions. Only 10 percent of the small businesses surveyed believe conditions are getting worse. All of the second quarter results are consistent with results from the first quarter, but show significantly increased optimism relative to the second quarter of 2010.

Many large and small businesses in Texas report improved financial performance as compared to one year ago.

More than two-thirds (69 percent) of large business managers surveyed say that their firm's financial position is better than it was 12 months ago, consistent with results from the previous quarter, but is 28 percentage points higher on a year-over-year basis.

Of the small businesses surveyed, half (50 percent) report that their financial position is better than it was last year, consistent with results from the first quarter of 2011 but 16 percentage points higher year-over-year. In the second quarter of 2011, only eight percent of small businesses report that their finances have deteriorated over the past year, down from 20 percent one year ago.

Many large businesses in the state expect to hire new employees in the second half of the year and an increased percentage of large businesses expect to increase spending on business development and investments in the near-term. Small businesses, however, appear reluctant to hire or increase spending at this time.

Half (50 percent) of large business respondents plan to hire additional employees in the next six months, consistent with the first quarter of 2011, but 21 percentage points higher on a year-over-year basis.

About one-third (35 percent) of small business respondents in Texas report plans to add employees to the payroll over the next six months. This number has held relatively steady over the past year.

On the investment side, there was an uptick in the percentage of large businesses that have plans to increase spending on business development and investments over the next six months, an increase of 12 percentage points from the first quarter of 2011 to 39 percent. For small businesses, 67 percent plan to keep spending on business development or investments at current levels, consistent with results from the first quarter of 2011.

Most Texas businesses are able to access the credit and financing they need.

Eighty-five percent of large businesses surveyed say that they are currently able to access the credit or financing they need. This number is down eight percentage points from the first quarter of 2011, but is consistent with results from earlier quarters.

For small businesses, 85 percent say that they have adequate access to credit, consistent with results from the previous quarter, but 10 percentage points higher on a year-over-year basis.

Small Business focus

Capital One 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. Local small business respondents in the second quarter of 2011 express similar sentiments in regards to financial performance, access to credit, economic conditions, hiring and spending on business development and investments as compared to small businesses nationally. In the second quarter, Capital One also took a closer look at small business hiring plans and factors that weigh into hiring decisions. The poll suggests that plans to expand the payroll are modest and that the key factors that drive small businesses' decisions to hire are a need to replace employees who have left the company, a need to support plans for growth and increased revenue or sales.

Of the local businesses planning to hire during the next six months, 76 percent expect to expand by one to 10 employees and only 17 expect to hire more than 10 employees over the period.

When asked about the primary factor driving hiring decisions, the top answers were: replacing an employee who left the company (47 percent), an increase in revenue or sales (16 percent) and hiring to support growth or expansion (15 percent).

Only seven percent of small businesses surveyed report that concerns about access to credit are impacting their decision not to hire.

Finally, the survey found that concerns about rising fuel prices, which were voiced in the first quarter survey, appear to have eased significantly for local small businesses.

Only 12 percent of Texas small businesses polled say that they expect fuel prices will place "extreme" or "quite a lot" of pressure on their business over the next six months, down 14 percentage points relative to the first quarter of 2011.

"Survey results for the second quarter of this year suggest that financial performance has stabilized or even improved for many Texas small businesses over the past year," said Eastman. "With growing financial stability and concerns about rising fuel prices largely out of the way for most respondents, we expect local small businesses will soon be ready to consider potential growth opportunities. It is encouraging to see that most small businesses in Texas are confident that they can access credit and financing as needs arise."

Consumer outlook

Texas consumers continue to report a difficult job market and their confidence in local business conditions has weakened.

In the survey for the second quarter of 2011, 57 percent of Texans polled believe that jobs are "hard" or "nearly impossible" to find, an increase of 12 percentage points from the first quarter of 2011. Much of the change, however, can be explained by a decline in the percentage of consumers who say they are uncertain about the current state of the local job market. Consistent with the first quarter of 2011, 35 percent of respondents believe that jobs in the state are "easy to find" or "can be found with effort."

Sixty-three percent of consumers believe that local business conditions are "only fair" or "poor," which represents an increase of 11 percentage points from the first quarter of 2011. Only 35 percent of respondents believe that local business conditions are "excellent" or "good," down eight percentage points from the first quarter of 2011.

Most Texas consumers report that their personal financial situation has not improved over the past year and that their personal savings have remained steady or declined.

Forty percent of Texas consumers surveyed report that their finances have held steady compared to one year ago, while a nearly equal percentage (39 percent) say that their personal financial situation has worsened. Only 21 percent of Texans surveyed report improved personal finances. All of these results are consistent with previous quarters.

Consistent with results from previous quarters, 39 percent of Texas consumers surveyed say that their personal savings have remained "about the same" as they were six months ago. One-third (35 percent) of consumers surveyed report that the amount they have in savings has declined over the past six months, a number that has held fairly steady over the past year.

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 404 interviews of 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 June 14-28, 2011. The margin of error is 4.9 percentage points for each group at the 95 percent 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 $10 million or more in revenue (200 interviews) as reported by the respondent. In addition, 1,904 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 June 13-July 1, 2011. The margin of error is 2.3 percentage points at the 95 percent confidence level for the national study and +/-4.37 percent 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 SIC codes.