Seattle Sun Newspaper - Vol. 7, Issue 4, April 2003

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BUSINESS BEAT

War good for business? Not here

By CLAYTON PARK

Conventional wisdom suggests that "War is Good for Business." It's even a slogan on signs by protesters of the current U.S. war on Iraq, which sarcastically suggests that people "invest" their sons and daughters.

But is it really?

Boeing Co. officials say the U.S.-led invasion of Iraq will hurt the company more than help it despite being a leading defense contractor. The reason: Boeing, as the world's biggest maker of commercial airplanes, would suffer far greater from lost plane orders.

Likewise, Washington state's chief economic forecaster, Chang Mook Sohn, recently warned that the state's economy, which has been slow to recovery from the recession, will likely continue to struggle for the rest of this year.

He doesn't expect employment growth to pick up until sometime next year and that's ASSUMING a best-case scenario of a quick end to the Iraq War. Should the war drag out or take a turn for the worse, it will probably delay the local economy's recovery even further.

The impacts of the war, which began March 20, and the weeks leading up to it, have already been felt by businesses in multiple ways:

First, rising gasoline prices, which set a record high in Seattle this past month, have increased the cost of products and supplies used by businesses because it has become more expensive to transport those goods.

Second, because consumers are spending more at the gas pump, they've had less money for eating out or buying non-essential items.

Third, a recent survey of shoppers across the country shows a large increase in the percentage of those who have delayed making major purchases 16.2 percent, as opposed to the 4-6 percent normally for this time of year. Britt Beemer, a national retail expert with America's Research Group, blames the increase on anxiety over the war, high utility bills and job worries.

The main exception to the rule, said Beemer, are businesses "focused on the home environment," as in home improvement and home furnishings stores, thanks to Americans spending more time at home.

Several business owners in North Seattle say they've seen a deeper-than-normal drop in sales since the beginning of the year.

Frank Fadden, general manager of Clark Office Products in Lake City, said sales for his business got off to an encouraging start in early January, but in the middle of the month "it just quit and hasn't picked up since. I walked into four offices this morning to call on regular accounts and walked out without a single order. There was no positive energy. I returned to my office and thought: 'Why don't we just shut this place up and go fishing?'

"People are very anxious (about the war). They're waiting for the other shoe to drop. ... I've been hearing the same thing from other business owners. Things are pretty much down all over."

Carolanne Watness, who along with her husband Eric, own the Chelsea Station on the Park bed-and-breakfast inn in upper Fremont, said, "We had a HARD February, after having had a great January, and March is not looking good either."

"The big ugly for us is gas prices," said Watness. "The bed-and-breakfast industry is concerned about what this (high gas prices) will mean for summer travel."

Of course, some merchants, when asked to comment publicly, will insist that business is fine, even when privately acknowledging that they are struggling, said Fadden. "People don't like to admit they're struggling because it doesn't show well," he said.

Still, Fadden said, "I'm hopeful that business will turn around when things in Iraq settle out."

If not, the casualties of war may soon include many local businesses as well.