In consecutive quarters the percentage of firms reporting an anticipated expansion in future activity was greater that the percentage expecting a contraction in activity. Capital spending and employment expansion plans reflect the rise in business optimism, as the percentage of firms reporting likely increases in these areas of activity rose between December 2001 and March 2002. On balance the performance of firms in the past two quarters compared to the previous two quarters was encouraging 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 (45 percent) is much greater than the percentage of firms reporting lower sales (30 percent) with 24 percent of firms reporting the same level of sales. The past six months has also witnessed increased wages and benefits provided to employees by 55 percent of respondents compared to 6 percent of respondents reporting a decline in employee compensation. Another 39 percent of respondents kept employee compensation at existing levels (see Table 1). 

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

Currently, businesses in manufacturing, communications and information, and professional and scientific services are the most optimistic about future business conditions in the local economy, while firms in health care, real estate, and retail and wholesale trade are the least optimistic about future economic conditions. With regard to future activity at the firm level, firms in communication and information services, construction, and manufacturing reported the strongest inclination for expanded activity over the next six months in 2002 (see Table 2).