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Pessimism is resurfacing among Buffalo Niagara business executives, who say they are less confident than in the last couple of years about current economic conditions and future prospects for this year, according to an annual business survey sponsored by First Niagara Financial Group.

The Buffalo-based bank’s sixth annual Survey of Upstate New York Business Leaders found that just over 20 percent of local business leaders felt current business conditions were better at the end of 2012 than six months earlier. That’s down from 24 percent a year ago.

Another 43 percent said conditions were about the same, while 36 percent said they were worse, up from 34 percent a year ago.

Looking ahead, 28 percent expect business conditions to improve this year, but that’s down from 33 percent last year. Thirty-two percent project conditions will stay the same, down from 40 percent, while 40 percent expect worsening conditions, up from 27 percent. More of them expect their own revenues and workforces to increase rather than decrease this year, but more also expect lower profits.

“It appears many Buffalo Niagara business executives, like those throughout upstate New York, are experiencing lower levels of confidence about the economic outlook for 2013 as they continue to hold out for a more vibrant economy,” said Buford Sears, the bank’s Western New York market executive.

That’s not surprising, he said, noting that it’s also not isolated to Western or even upstate New York. “It may be a little more disappointment, a little more unease, a little more frustration with where the economy is on a whole,” he said. “It’s symptomatic of feelings across the board.”

However, he cited as “silver linings” the findings that just over half of respondents plan to invest in new property or equipment this year, and that twice as many companies plan to hire additional staff this year as will reduce it. “That’s an increase in jobs that are expected, so that’s a good thing,” he said.

Overall, Western New York was the lowest-rated of the five major upstate regions in the survey on two of the three confidence indexes, for overall confidence and future confidence.

Across the state, the survey found that business confidence had retreated after three years of increasing optimism following the recession, based on responses from many of the 1,142 leaders of private companies in 55 counties north of New York City. Of those, 189 were from chief executives, chief financial officers and other senior managers of Western New York private businesses.

“The reality is that a good number of these company executives weathered an uncertain economy over the past five years, and even showed signs of increased optimism for the past two years, but now many appear frustrated with continuing to operate in the ‘new normal’ while still awaiting a more robust economy,” said Peter Cosgrove, the bank’s regional president for upstate.

The 26-question study was conducted in the fourth quarter by the Siena College Research Institute in Loudonville, outside Albany, and targeted companies with $5 million to $150 million in annual sales in the service, manufacturing, engineering and construction, retail, wholesale and distribution, financial, and food and beverage industries. The study broke the upstate region into five areas for Buffalo, Albany, Rochester, Syracuse and the Hudson Valley/Westchester County.

First Niagara, the No. 2 bank in Western New York, has sponsored the study for the past few years to measure the attitudes and outlook of the small and middle-market business community that it targets for customers. The survey helps bank executives understand the business needs of its customers and potential customers, while also giving the bank increased exposure.

“It is important for these executives and their companies to stay focused and positioned to take advantage of any predicted upswings in consumer confidence and spending when they come,” Sears said.

Other results of the survey found that:

• Twenty percent of area business leaders expect their own industries to be better this year, down from 32 percent a year ago, while 37 percent say it will be the same – up from 33 percent – and 43 percent say it will be worse, up from 36 percent.

• Twenty-seven percent say they expect to add jobs, equal to last year, while 58 percent say their workforce will hold steady. Thirteen percent, up from 12 percent, say they will cut jobs.

• Fifty-five percent will invest in fixed-asset purchases in the next year to meet demand, cut costs or enhance profitability. Of those, 59 percent will use internal funds while 31 percent will borrow.

• Thirty-five percent, down from 47 percent, think revenues will rise, while 34 percent project flat revenues and 31 percent expect a drop, up from 19 percent a year ago. Similarly, 28 percent expect higher profits, down from 36 percent, while 29 percent expect flat earnings, and 43 percent say earnings will drop, up from 19 percent.

• To strengthen profits, 34 percent of business leaders will seek to grow the market and demand as their primary strategy, while 33 percent will slash expenses, 15 percent will raise prices, and 11 percent will deploy new technology. But they also face extra challenges, with 23 percent citing governmental regulation, 21 percent citing the economy, 14 percent listing taxes and 13 percent naming health care costs as the primary problem.

The survey’s confidence index measures business leaders’ views and projections on economic conditions using a scale of zero to 200, with 100 as break even and 200 being the most optimistic. Buffalo Niagara’s overall Confidence Index came in at 80.6, down 14.2 points from last year. Its current index was 78.6, down 10.6 points, while its future index was 82.5, down 18 points.

email: jepstein@buffnews.com