Fewer Hawai'i business leaders believe the local economy will grow next year.

A survey of 432 Hawai'i companies found that just 32 percent expect the state economy will improve in 2007. That's the lowest level of optimism in at least four years. A year earlier, 41 percent expected the economy to improve.

The survey, from the Business Banking Council, suggests that the local business community is growing less optimistic and more pessimistic about the future. Still, a majority envisions that 2006 will be an economic peak followed by a plateau.

"Call it cautious optimism, not being overconfident, or maybe even the 'don't want to jinx it' syndrome ... whatever you call it, the outlook from most businesses is for things to remain the same as they are — which is in a good place," the council said in a statement.

Although economists don't expect the state's economic expansion to stall next year, signs of slowing growth — rising inflation, flattening visitor arrivals, fewer home sales and higher interest rates — may be leading business leaders to lose some of their optimism.

Business leaders expecting the economy will worsen have grown, with 17 percent of survey respondents saying they believe the economy will weaken. A year earlier, 12 percent of respondents held that view.

A majority — 51 percent of respondents — believe Hawai'i's economy will stay the same next year.

"I'm hoping it'll stay the same," said Neal Otani, president of produce wholesaler Y. Fukunaga Products Ltd.

Otani said he's concerned that a shortage of qualified employees will restrain businesses and the economy from growing.

"It's gotten so good (that) there's no labor," he said. "That's what's hurting the businesses."

The Business Banking Council, which is sponsored by American Savings Bank, said Hawai'i's business community "has been enjoying robust results over the last few years and most are now predicting that this positive climb may start leveling off."

Most business operators may expect Hawai'i's economy to peak this year, but the group hasn't necessarily been a good predictor of economic strength — having taken a similar view in mid-2003 when 51 percent of survey respondents expected a flat economy in 2004. Instead, the economy grew by 5 percent that year.

Local economists are predicting the economy will grow next year, but at a slower rate than this year.

The state Department of Business, Economic Development & Tourism forecasts that the economy, accounting for inflation, will grow 2.4 percent next year, following growth of 2.7 percent this year and 3.4 percent last year.

The agency expects 2007 real personal income to rise 2.1 percent, and a 1.5 percent gain in jobs.

Qmark Research and Polling conducted the survey for the Business Banking Council from July 10 to 24 . Qmark said its survey has a margin of error of 4.9 percentage points.

In a similar Qmark survey in March, a slight majority of companies perceived that economic growth had peaked last year and would go flat this year.

The July survey shows that most business leaders now believe this year will be the peak of prosperity for the economy.

In the survey's optimism index, which gauges business' general outlook for Hawai'i's economy, optimism was at its lowest since 2002. Compared with a baseline of 100 established in 1998, the index is at 119, down from 129 a year earlier.

The survey's performance index, which measures business employment, revenue and before-tax profit, was at its highest mark since the index was created. Compared with the 1998 baseline of 100, the index is at 131, up from 121 a year earlier.

Businesses reported relatively little change in employment over the last year, with 22 percent expanding their payroll. That was 2 percentage points fewer than a year earlier.

Some 12 percent of businesses reported decreasing employment, compared with 14 percent a year earlier.

Otani the produce wholesaler said staffing has been a challenge, with no easy solution. "The business is there to be had, but we can't handle what we have sometimes," he said, adding that he expects more demand for produce as new hotels, restaurants, time shares and condominiums open in Waikiki.

Hawai'i's unemployment rate this year has ranged from 2.4 percent to 3.1 percent, reflecting an extremely tight labor market.

In the survey, businesses were asked how they are dealing with the difficulty of finding and keeping good employees. The top responses were giving employees additional training or responsibilities (28 percent), don't know (18 percent) and increasing incentives (16 percent). Other responses were increasing compensation (14 percent), advertising more (8 percent) and hiring family members (5 percent).

Businesses reported relatively little change in revenue over the last year, with 54 percent saying revenue grew, compared with 48 percent a year earlier. Revenue fell for 12 percent of respondents, compared with 13 percent a year earlier.

Profit before taxes, however, reached a record high since the study's 1998 inception, with 48 percent reporting a gain, compared with 38 percent a year earlier. Some 17 percent reported lower pretax profit, down from 21 percent a year earlier.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.