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Hope high for better half of 2003

June 30, 2003

Paul Clinton

With the door closing on 2003's first half, observers say a

full-blown economic recovery for the next six months isn't in the

offing. Newport-Mesa's economy is expected to grow at a more

accelerated pace, though.

"The economy in Costa Mesa specifically and Orange County

generally will probably grow only slowly during the second half of

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this year," said Ed Fawcett, president of the Costa Mesa Chamber of

Commerce.

Economic growth, while generally stagnant during the six-month

period ending today, should pick up at between 3% to 5% in the two

cities, officials said. During the first three months of the year,

the Commerce Department reported Thursday, the nation's economy grew

a slack 1.4%.

High energy costs, a still-deteriorating job market and a series

of expected tax hikes could mute any chance of a recovery from the

gloomy economic conditions ushered in by the sharp stock market

declines that began in 2000.

Chip Hanlon of Newport Beach's Euro Pacific Capital Inc. said

economic conditions should improve somewhat in 2003, but only

temporarily. Stocks rallying since March have begun to pause somewhat

over the past week.

"The stock market seems to be predicting an uptick in economic

activity," Hanlon said. "There will be some corresponding economic

strength. It just won't be lasting."

Nestled along the coast of Orange County, Newport-Mesa has dodged

the worst of an economic downturn that has hit California

particularly hard.

Home values have risen, and car and truck dealerships and home

furnishings stores have fared well, said Richard Luehrs, Newport

Beach Chamber of Commerce president.

The ending of combat in Iraq, Luehrs said, has also spurred some

spending.

"We're seeing companies starting to loosen their purse strings,"

Luehrs said.

President George W. Bush's tax-cut plan, which goes into effect on

July 15, should be another economic stimulator, Luehrs said. Workers

will begin seeing extra cash in their paychecks.

"I believe that people have been conservative in their spending

habits," Luehrs said. "They'll begin to see an increase in their net

pay."

A widely watched consumer confidence report, released Wednesday by

the Conference Board, showed a drop off in spending in May. The

report took a more optimistic view of the second half of the year,

predicting increased spending then.

Less clear, the experts said, is whether the Federal Reserve's

13th rate cut since early 2001 will be a boost to business. The Fed

cut to 1% the rate banks use with each other in securing overnight

loans.

Also problematic for businesses has been the still-high cost of

electricity and rising costs of workers' compensation lawsuits. The

state Legislature is not expected to significantly address what some

say is rampant workers compensation fraud.

Fawcett said the state's inhospitable atmosphere for business has

driven companies across the border. A division of Canon USA in Costa

Mesa pulled up stakes in 2002.

Assemblyman John Campbell, who represents Newport Beach, agrees.

"The best office of the Arizona and Nevada chambers of commerce is

the capitol building in Sacramento," Campbell said. "It's costing so

much [to run a business in this state]."

* PAUL CLINTON covers the environment, business and politics. He

may be reached at (949) 764-4330 or by e-mail at

paul.clinton@latimes.com.

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