June 2001

Survey Reveals Optimistic Outlook about the Local Economy

Summary of Returns
June 2001

This overall business sentiment is reflected in responses by firms regarding expectations of their future level of activity, capital expenditures, and hiring decisions. In the next six months nearly 52 percent of respondents expect their firms’ activity to remain the same while 38 percent reported that they are likely to expand compared to 6 percent of respondents who expected their firms’ level of activity to contract. The percentage of firms reporting increases in capital expenditures (25 percent) over the next six months is greater than the percentage reporting decreases (12 percent), with about 58 percent of firms reporting a constant level of capital spending.  With regard to plans for hiring more workers the percentage of firms reporting likely future increases in employment (34 percent) is greater than the percentage reporting decreases (6 percent) while 57 percent of firms do not expect to change their existing level of employment.

On balance the performance of firms in the first six months of 2001 compared to the last six months in 2000 exhibited a relatively stable business climate with a majority of firms achieving the same or higher levels of sales over the past twelve months.  The percentage of firms reporting an increase in sales (41 percent) is slightly above the percentage of firms reporting lower sales (38 percent) with about 21 percent of firms reporting the same level of sales. The past six months has also witnessed increased wages and benefits provided to employees by 50 percent of respondents compared to only 2 percent of respondents reporting a decline in employee compensation. Another 46 percent of respondents kept employee compensation at their existing levels.

Asked to identify the most serious challenges confronting businesses, the following represented the six most important for the majority of the respondents: quality of labor, taxes, availability of employees, health care expenses for employees, cost of labor, and competition from other businesses.

Survey Responses
Disaggregated by Sector/Activity

Disaggregation of the responses by type of activity  indicates that businesses in the manufacturing and real estate sectors  were the most optimistic about future business conditions in the local economy, while the firms in health care and other services such as personal care and automotive services were the least optimistic about future economic conditions. With regard to future activity at the firm level, those firms classified as providing  professional and scientific services (e.g. legal, engineering, accounting) and those providing health care services reported the strongest inclination for expanded activity.

In summary, the responses to the first Quarterly Business Conditions and Outlook Survey indicate steady performance in the local economy. A relatively large number of respondents perceive that general business conditions, sales, prices, and employment will remain at current levels over the next six months. However, over one-third of survey respondents felt that business conditions, their level of activity and employment would be higher over the next two quarters. With a smaller percentage of respondents expressing pessimism about the local economy’s business outlook, overall business sentiment appears to be in the direction of slightly stronger performance over the next six months.