Businesses turning away from government data

November 23, 1992|By Jeff Rowe | Jeff Rowe,Orange County Register

Every month, the federal government generates reams of economic reports on everything from machine tool orders to cotton prices.

Mark Lee doesn't find much of it useful. Rather, the president of General Aluminum Forgings in Santa Ana, Calif., relies mostly on statistics generated by the aerospace industry to gauge the health and future of his business.

Across the spectrum of industry, executives are forsaking government reports, which they regard as inaccurate, late and geared to measure a bygone, wheat-and-steel economy. To guide their businesses, they are turning to economic statistics assembled by scores of private data collection and forecasting companies.

"The government has the answers but not the questions people are asking," said David J. Thomsen, director of the Newport Beach, Calif.-based Economic Research Institute, which compiles figures on wages and benefits for client companies. Sales are up 30 percent this year.

One measure of the private data-collection industry can be found in the explosive growth of trade and business magazines. About such periodicals are published in the United States, up from 7,500 a decade ago.

The informal information network can be formidable when combined with other data. Massachusetts-based Cahners Publishing Co., for example, draws on research done by many of its 68 trade magazines to produce a business confidence index, xTC an outlook on the electronics, building, entertainment and other industries.

"There isn't much government data for new and emerging industries," said Kermit Baker, head of Cahners' economic reporting and forecasting group, which has a staff of 20 people.

Cahners and other private information sources seek to fill those gaps.

"Information is the hot commodity," said Shel Holtz, spokesman for Allergan Inc., the Irvine, Calif.-based maker of eye- and skin-care products. Allergan doesn't depend much on the government's data-collection machinery, relying instead on independent sources it says can supply market information it needs faster and more accurately.

"The government doesn't really address the middle market," said Marty McLaughlin, a spokeswoman for BDO Seidman, the international accounting and consulting company. BDO surveys 20,000 small and medium-sized businesses each year, asking them about financing, exports, trends and other things affecting their business.

Not everyone is a believer in private economic information, because it may be based partly on government figures. "Garbage in, garbage out," said Esmael Adibi, director of the Center for Economic Research at Chapman University in Orange, Calif.

And many businesses and the media remain so devoted to figuresgenerated by the government that early warning signs of the recession issued by private groups were widely ignored. In 1988, the New York-based Conference Board's index of classified job listings in newspapers showed job growth was leveling. It began falling the following year but few paid much heed.

Still, entrepreneurs continue to create sources of information.

Three years ago, Tim Sanborn of Gloucester, Mass., was offered a promotion that carried a $15,000 increase in salary. But the new job involved a move to New Jersey, so Sanborn asked an accountant to calculate the financial impact of the move.

Factoring in differences in state taxes, housing costs, food costs and other things, the accountant determined that Sanborn actually would lose $2,000 by making the move.

The result: Sanborn and the accountant, James Angelini, created Right Choice, which does customized cost analyses of cities around the nation.

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