Capital One Bank, a local banking partner with more than 160 branches in Texas, today released the results of its quarterly “Market Pulse” survey gauging the economic outlook of local businesses and consumers for the first quarter of 2010. Compared with last year’s first quarter survey results, Capital One’s survey show that Texas businesses increasingly believe economic conditions are improving and report that their financial position is better than it was one year ago. Although consumers are increasingly confident about local business conditions, they continue to express concern about the local job market and most are holding off on major purchases.

      “Our survey finds a growing optimism about economic conditions and financial performance among local businesses, both large and small,” said Annella Metoyer, Rio Grande Valley Market President for Capital One Bank. “Although consumers remain cautious about the job market and their own personal finances, their overall opinion of the economy may improve as local businesses continue to gain confidence and make planned investments in personnel.”

Consumer outlook

      In the first quarter of 2010, many Texans report that their personal finances are starting to stabilize. A little more than one-third (35%) of consumers surveyed report that their financial situation is worse than it was one year ago, down from 42 percent last quarter. Twenty percent of consumers in the state say their financial situation is better than it was one year ago while 44 percent say their personal finances have held steady.

      In terms of personal savings, however, many consumers in the state continue to experience decreases. About four out of 10 (39%) consumers surveyed report that the amount they have in savings has declined in the past six months. Nearly the same amount (37%) say their savings have held steady during this period. This may account for the large number of Texas consumers (84%) that plan to hold off on large purchases like a home, car, major appliance or a construction project during the next six months.

      On a positive note, Texas consumers are increasingly confident about local business conditions, with 42 percent of those surveyed reporting that area business conditions are “excellent” or “good,” up from only 29 percent one year ago. When it comes to jobs though, consumers in the state are divided on whether there are jobs available locally. Nearly half (46%) of Texans say jobs are “hard” or “nearly impossible” to find while 41 percent of respondents say jobs are “easy to find” or that they “can be found with effort” in their area.

Business outlook

      This quarter many Texas businesses, both large and small, have a positive outlook on economic conditions. Nearly half (47%) of large businesses surveyed say economic conditions for their business are improving. While this is consistent with survey results from last quarter, it is 25 percentage points higher year-over-year. Forty percent of small businesses believe conditions are improving, which is also consistent with last quarter but 22 percentage points higher than the first quarter in 2009.

      Businesses in the state increasingly report that their financial position has improved since last year. In the first quarter of this year, 43 percent of small businesses surveyed in Texas say their financial position is currently better than it was one year ago, a 15 percentage-point increase over last quarter results. Nearly half (49%) of large businesses say their financial position is better than it was 12 months ago, consistent with last quarter but 25 percentage-point higher year-over-year.

      As their financial performance picks up and their economic outlook becomes brighter, many large businesses plan to create jobs in the near term. Nearly half (49%) of large businesses surveyed in Texas report plans to hire new employees over the next six months.  Most small businesses (69%), however, plan to keep employee numbers at current levels. Consistent with previous quarters, most large (61%) and small (63%) Texas businesses also plan to hold business development and investment spending steady during the next six months.  For those businesses considering making investments, survey results suggest they will have access to any financing or credit needed. More than three quarters (78%) of small businesses and 82 percent of large businesses surveyed report that they are able to access needed credit or financing.

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. The results for the first quarter show that Texas small businesses express a similar level of confidence about the financial position of their own business as the national sample, but they are more positive about economic conditions overall. While 21 percent of small businesses surveyed nationally believe that economic conditions are worsening, only 13 percent of small businesses in Texas agree. Nearly half (46%) of Texas small business owners say that economic conditions are stable, compared with only 39 percent of the national sample.

Despite having a more optimistic economic outlook, Texas small business owners are cautious about hiring. Nearly one-third (32%) of small businesses surveyed nationally have plans to add talent in the next six months but only 24 percent of Texas respondents have such plans.

When looking ahead to potential challenges the business community may face over the next six months, half (51%) of Texas small businesses cite the ability to acquire new customers as one of their biggest concerns and 28 percent say maintaining existing customers will be a focus. These numbers are comparable to national survey results. Local small businesses are less concerned than the national sample about securing the capital needed to continue operations, with only 19 percent of Texas small business owners site financing as one of their biggest challenges over the next six months compared with 29 percent nationally. 

“The resurgence of small businesses within the U.S. will be a gradual process, but with a steady improvement in financial conditions, it appears that the outlook for local businesses is trending in the right direction,” said Robert M. Kottler, Executive Vice President of Small Business Banking at Capital One. “While most small businesses surveyed report adequate access to credit, there are a range of financing and cash management options available for small business owners to explore.”