After two consecutive quarters indicating that the percentage of firms reporting an anticipated expansion in future activity was greater that the percentage expecting a contraction in activity, the June 2002 survey found a sharp downturn in business optimism. Capital spending and employment expansion plans reflect the decline in business optimism, as the percentage of firms reporting likely increases in these areas of activity fell between March 2002 and June 2002.  On balance the performance of firms in the past quarter compared to the previous quarters was not as troubling.  The same proportion of  firms (69 percent) achieved the same or higher levels of sales compared with sales in the preceding six-month period in both the March 2002 and June 2002 surveys.  Additionally, in the June 2002 survey about 56 percent of the reporting firms provided increased wages and benefits to employees compared to 55 percent in the March 2002 survey. 

Asked to identify the most serious challenges confronting businesses, the following represented the most cited in order of importance: uncertainty of future economic performance, health care expenses for employees, competition from other businesses, availability of employees, and taxes.

Currently, a majority of the reporting firms in manufacturing and those providing professional and scientific services expect improved business conditions in the local economy, while firms in construction and personal services are among the least optimistic about future economic conditions. With regard to future activity at the firm level, firms providing professional and scientific services and those in the manufacturing and health care sectors indicate the strongest inclination for expanded activity over the next six months in 2002. In all cases except for firms providing professional and scientific services, however, the diffusion indexes for future activity at the firm-level have declined between March 2002 and June 2002.