September 2002

Area Businesses Feel Weak Business Conditions Likely to Persist in the Local Economy for the next six-months

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September 2002 Survey
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The September 2002 Business Outlook Survey for the local area indicates a gloomy prognosis about future business conditions. The future activity index fell from 33 to 29 between the June 2002 and September 2002 surveys, reflecting two consecutive quarters of decline in business sentiment (see Chart). The September 2002 survey found that 39 percent of reporting firms felt that future business conditions are likely to improve while 10 percent indicated that conditions are likely to get worse. In the June 2002 survey, 42 percent of the reporting firms anticipated improved business conditions while 9 percent expected worsening conditions.  

Since March 2002, there has been a downward trend in the percentage of firms reporting an anticipated expansion in future activity and a steady increase in the proportion of firms indicating that their level of economic activity is likely to remain static for the next six months.  Hiring plans appear to be on hold for the majority of reporting firms. Capital spending plans did show a slight improvement as the percentage of firms reporting likely increases in spending rose between June 2002 and September 2002.  The performance of firms in the past two quarters reflected the gloomy outlook with a majority of firms achieving the same or lower levels of sales in the last six months compared to the previous six months. The percentage of firms reporting stable or declining sales has increased within the last three months from 53 percent in June 2002 to 59 percent in September 2002. The past six months has also witnessed a static picture with regard to employee compensation as the wages and benefits provided to employees remained the same for 55 percent of reporting firms in September 2002 compared to 39 percent in June 2002.

Currently, businesses in wholesale and retail trade, real estate, and personal services, are the most optimistic about future business conditions in the local economy, while firms in manufacturing, communications and information, and professional and scientific services are the least optimistic about future business conditions in the local economy. 

With regard to future activity at the firm level, firms in communication and information services, finance and insurance, personal services, and real estate reported the strongest inclination for expanded activity over the next six months.