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Optimistic, but ...

If you just read the numbers gleaned from the St. Petersburg Times' annual Business Outlook survey, you'd think Tampa Bay area executives were positively euphoric about their prospects for 2004.

A record nine out of 10 think the U.S. economy will improve this year. More than eight out of 10 think their business will increase. More than half expect to spend more on technology, capital expenses and employees.

But talk to a few of the executives and you'll find a tentativeness underlying their optimism. Part of it may be fear of terrorist acts, which leads the list of concerns this year. Memories of the stock market bust of 2000 also may be triggering worries that inklings of an economic rebound are nothing more than a mirage.

"I'm very nervous about the recovery we're seeing," said Duncan Broyd, managing principal for HOK Architects in Tampa. "It's been generated by tax cuts, but is that for real? What's the effect? Who's paying?"

Business has definitely picked up for a broad range of companies in the region. At Clearwater's Medical Technology Systems, increased capital spending by pharmacies has meant more sales of the company's pill packaging machines.

Continued strength in the construction trades led to more shiploads of lumber, cement and steel through Port Manatee, contributing to record revenue in 2003 and high expectations for 2004.

Dataglyphics, a Web development and hosting company in St. Petersburg, has just doubled its office space and is considering hiring more workers as clients boost their Web spending.

And A-1 Temps in Brandon has several staffing projects this month for clerical, light industrial and assembly work.

Still, A-1 vice president Jeremy Dixon isn't about to pop the champagne.

"I was around during the last recession in 1989-90 and when that ended, it was like someone flipped a switch and companies started hiring again," he said, adding that temporary staffing agencies are often early indicators of both a recession and a rebound. "This time it's much more selective, only certain industries and certain companies. It's not across the board."

Gary Keller, chief financial officer of BBF Printing Solutions in Largo, said his business is up 5 to 7 percent over a year ago, thanks to a growing customer base.

"But orders have shrunk in size because customers aren't sure of demand," Keller said. "I'm still a little uneasy."

Mark Stroud, president of Echelon Real Estate Services LLC in St. Petersburg, said his company has luxury apartments, a condo project and a corporate headquarters under construction. He's even beginning to see an improvement in the market for office space, with more companies considering expanding or relocating into the Tampa Bay area. But he's not ready to declare the recession over.

"A lot of people are projecting a turnaround and hopefully it's going to come," Stroud said. "But it's got to be here, and be here for a while, till it really hits us."

Arthur Rutenberg keeps pinching himself over his industry's good fortune.

"We're in the ninth year of a five-year housing boom," said Rutenberg, chief executive of a home construction company in Clearwater that bears his name. "We keep expecting it to fall off the cliff and it hasn't. And overall conditions are not much changed, although the housing market has cooled a bit from its peak last year."

Franchisees of Rutenberg's company built 700 homes last year, mostly in Florida, pushing sales up 25 percent for the year. Average sale price was $650,000.

Home construction has benefited from record low interest rates and the perception that a home is a better investment than the stock market. Rutenberg said if the stock market continues to rise _ last year the Dow Jones Industrial Average rose 25 percent and the Nasdaq was up 50 percent _ that perception may well change.

"We also have to realize that interest rates are at a 40-year low," he said. "And they're going to rise, as sure as night follows day."

In addition, Rutenberg realizes that his perspective on the economy might differ dramatically from that of someone like an IBM employee who just learned his job was moving overseas.

"People have such diverse layers of interest, and they're all lumped into the one word: economy," he said. "If the job segment of the economy is what you're thinking about when you respond to a survey, then you don't think it's improved a whole heck of a lot."

The annual business outlook survey, now in its 16th year, was conducted earlier this month and included interviews with 174 local executives from a wide range of Tampa Bay area companies.

The results are spelled out through the charts in this section. Among the findings, public education was identified as the most pressing problem facing the Tampa Bay region for the second year in a row.

Health care costs are expected to create the most drag on companies' financial performance. Perhaps not surprisingly, cutting health plan benefits or increasing co-pays topped the list of cost-cutting steps in 2003. For this year, executives report their employees are paying a median of 9 percent more for coverage this year while their companies are paying a median of 15 percent more in health care costs.

In the political arena, executives expressed overwhelming support for President Bush over his Democratic challengers. They are split among potential candidates to replace Bob Graham in the U.S. Senate; the largest group, 18 percent, favors Democratic candidate Betty Castor, who is well known to local business leaders. And they strongly back Gov. Jeb Bush's decision to spend $369-million in taxpayer dollars to lure Scripps Research Institute into building a branch in Palm Beach County.

_ Kris Hundley can be reached at hundleysptimes.com or (727) 892-2996.

In your opinion, has the economy already seen a significant economic turnaround, or do you think it will occur in the first, second, third or fourth quarter of 2004?

2004 2003 2002

Already seen a significant turnaround 49% NA+ NA+

First quarter 7% 3% 5%

Second quarter 19% 14% 36%

Third quarter 11% 23% 42%

Fourth quarter 7% 22% 9%

Not until next year 2% 32% 7%

Not sure 5% 6% 1%

+ Wording was somewhat different in previous surveys. 2002 wording was: "In your opinion, will the current recession end in the first, second, third or fourth quarter of 2002, or not until 2003?" 2003 wording was: "In your opinion, do you expect to see a significant economic turnaround in the first quarter, second, third or fourth quarter of 2003, or not until 2004?"

"What leads you to this conclusion? +

2004

Stock market rising 25%

Seeing own business increase / 22%

sale increasing

Recovery gradual / not significant yet / 14% weak growth

Economic indicators improving 12%

Job growth / employment up 11%

Strong home 6% sales / construction

Slow job growth / low 6% unemployment

Expect to pick up in second quarter / 5% momentum beginning

+ Top responses

Which one of these factors do you expect to have the most drag on your business' financial performance in 2004?

2004 '03 '02 '01 '00 '99

Health care costs 27% 20% 13% 9% 8% 7%

Government regulations 25% 9% 10% 9% 17% 18%

Economy 16% 38% 34% 0% 0% 0%

Finding employees 14% 7% 8% 28% 48% 47% with the right skills

+ Top responses

Compared with 2003, do you think the economy will do better, do worse or stay about the same in 2004?

Compared with 2003, do you think your business will do better, do worse or stay about the same in 2004?

Compared with 2003, do you think other businesses in your industry will do better, do worse or stay about the same in 2004?

2004 2003 2002

Better 78% 49% 46%

Worse 2% 7% 13%

Same 20% 41% 40%

Do you expect your company's U.S. capital expenditures to increase, decrease or remain the same in 2004?

2004 2003

Increase 53% 35%

Decrease 6% 10%

Stay same 41% 54%

How much trouble does your company have finding workers with sufficient skills: a lot, some, only a little or none?

Which one of these steps did your business take to cut costs in 2003? +

2004 2003 2002

Reduced health plan benefits or increase co-pays ++ 47% 21% 10%

Cut back or froze new hiring 38% 41% 50%

Reduced staff travel 29% 42% 42%

Laid off employees 23% 28% 30%

None 23% 22% 19%

Froze or reduced pay 16% 20% 24%

Reduced a per diem for expenses 10% 6% 7%

Other 8% 10% 12%

General belt tightening 5% 15% 13%

Froze /reduced operating budgets / delayed capital 4% 0% 0%

expenditures

+ Top responses

++ Wording "or increase co-pays" was only used in 2004.

What recent news concerns you as you consider business prospects in 2004? +

2004 '03 '02 '01 '00 '99

1. Terrorist attacks 35% 15% 15% 0% 0% 0%

2. No news item causes 11% 2% 10% 1% 19% 6%

great concerns

3. War abroad 9% 77% 8% 0% 0% 0%

4. Unemployment / slow 8% 4% 6% 0% 0% 0%

job growth

5. Increases in health 8% 9% 5% 0% 0% 0%

insurance costs

6. International unrest / 8% 2% 3% 0% 0% 0%

world economy

7. Election uncertainty / 7% 0% 0% 0% 0% 0%

election politics

8. Declining U.S. dollar / 6% 0% 0% 0% 0% 0%

foreign exchange rate

9. Interest rates changing 6% 5% 5% 12% 31% 6%

+ Top responses

By what percent are health care premiums paid by your employees rising in 2004?

'04 '03 '02

0% 23% 27% 20%

1 to 9% 12% 12% 11%

10 to 19% 22% 21% 25%

20 to 29% 9% 11% 12%

30 to 39% 1% 8% 2%

40 to 49% 1% 1% 1%

50 to 59% 0% 1% 1%

60 to 69% 0% 0% 0%

70 to 79% 0% 0% 0%

80% or more 0% 2% 1%

Don't know 32% 17% 27%

Overall, what percent will your company's health care costs rise in 2004?

'04 '03 '02

0% 3% 3% 6%

1 to 9% 10% 9% 8%

10 to 19% 29% 29% 30%

20 to 29% 19% 21% 22%

30 to 39% 4% 10% 6%

40 to 49% 2% 4% 1%

50 to 59% 1% 0% 0%

60 to 69% 0% 0% 0%

70 to 79% 0% 0% 0%

80% or more 0% 1% 0%

Don't know 32% 23% 27%

In 2004, do you anticipate giving raises at, above or below the rate of inflation, which is about 2%, or will you freeze pay?

2004

At rate of inflation 26%

Above rate of inflation 67%

Below rate of inflation 2%

Freeze pay 1%

Not sure / no opinion 4%

In your opinion, which one of these is the single most pressing problem facing the Tampa Bay business community?

2004 '03 '02 '01 '00 '99

1. Public education 33% 33% 20% 24% 17% 33%

2. Transportation 12% 11% 10% 9% 0% 0%

3. Growth management 10% 6% 9% 13% 16% 14%

4. Attracting and developing 10% 9% 11% 10% 0% 0%

technology businesses

5. Lack of leadership 9% 9% 10% 13% 10% 9%

6. Status of air travel and 8% 19% 25% 0% 0% 0%

tourism

7. Recruiting new employees 7% 7% 7% 13% 28% 20%

8. Work going oversees 4% 0% 0% 0% 0% 0%

9. All equally important 4% 3% 2% 9% 11% 2%

10. Something else 3% 2% 4% 6% 8% 3%

If the general election for president were held today, which candidate do you think you'd vote for?

George W. Bush (R) 72%

Howard Dean (D) 6%

Wesley Clark (D) 3%

Al Sharpton (D) 2%

Dick Gephardt (D) 1%

Joe Lieberman (D) 1%

Don't know 13%

Other 2%

If the general election for Florida's U.S. Senate seat were held today, which candidate do you think you'd vote for?

Betty Castor (D) 18%

Mel Martinez (R) 12%

Katherine Harris (R) 9%

Bill McCollum (R) 9%

Johnnie Byrd (R) 4%

Barbara Sheen Todd (R) 2%

Don't know 43%

Other 1%

Gov. Jeb Bush and the Legislature recently agreed to spend more than $350-million in public money so that the Scripps Research Institute could expand to this state as a way to stimulate the economy and bring more biotech jobs to Florida. Do you agree or disagree with spending taxpayer dollars this way?

Disagree 17%

Agree 69%

Don't know 14%

Note: This same question was posed in a December 2003 public opinion poll conducted by the St. Petersburg Times and Miami Herald. Results showed that 42 percent agreed with spending taxpayer dollars in this way, 41 percent disagreed and 17 percent didn't know.

Do you expect to invest more, less or about the same in technology this year compared with last year?

2004 2003

More 57% 47%

Less 4% 13%

Same 38% 40%

In 2004, do you expect to increase or decrease the number of employees, or keep the total about as it is?

Are you planning to expand your business into new geographic markets in the next year?

Which geographic markets are you looking at to expand your business?

2004 '03 '02 '01 '00

Other Florida 32 30 19 31 22

Tampa Bay: Hillsborough, 26 25 17 17 21

Pinellas, Pasco Hernando

U.S.A. (outside Florida) 25 30 41 35 34

Europe 16 13 11 13 15

Latin America / Caribbean / 12 9 17 15 11

Mexico

Asia 10 8 12 11 5

Other 7 11 10 10 13

Global 4 0 1 0 3

Manatee 1 6 6 1 4

Sarasota 1 1 2 2 2

Polk 1 3 1 0 3

Australia 1 3 1 2 1

Africa 1 1 0 1 1

What measures, if any, have your company taken in the past year to increase productivity? +

2004

Improved technology 65%

Increased training 43%

Tightened procedures 37%

Reduced staff 16%

Employee incentives / 4%

empowerment

+ Top responses

HOW THE SURVEY WAS CONDUCTED

The St. Petersburg Times research department surveyed 174 Tampa Bay area business leaders by telephone Jan. 7-16. The survey, directed by senior analyst Ellen Drizin, has a standard margin of error of plus or minus 3 percentage points.

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