June 2003

Rise in Optimism about Business Conditions in the Local Economy for the Second Half of 2003

The June 2003 Business Outlook Survey for the local area found that area firms expect an improvement in economic conditions in the third and fourth quarters of 2003 compared to their expectations at the end of March 2003. The Business Outlook Index rose from 31 to 47 between the March 2003 and June 2003 surveys. The most recent survey found that 54 percent of reporting firms felt that future business conditions are likely to improve while 7 percent indicated that conditions are likely to get worse. In contrast, the March 2003 survey found that 43 percent of the reporting firms anticipated improved business conditions while 12 percent expected worsening conditions.

Summary of Returns
  June 2003

The percentage of firms reporting anticipated expansion in future levels of activity was stable between the March 2003 and June 2003 surveys. Between the last two business outlook surveys, the proportion of firms reporting that their levels of economic activity are likely to remain unchanged rose slightly from 54 percent to 56 percent.
The June 2003 survey indicated that about 48 percent of reporting firms experienced lower sales and about 23 percent experienced improved sales in the past six months compared to sales in the second half of 2002. The past six months witnessed some slight changes for wage earners as the percentage of firms indicating that they had increased employee compensation rose from 46 percent to 47 percent between the March 2003 and June 2003 surveys.

Asked to identify the most serious challenges confronting businesses, the following represented the most cited in order of importance: uncertainty of future economic performance, taxes, poor sales, and competition from other businesses.

Currently, businesses providing personal services and communications and information services are the most optimistic about future business conditions in the local economy, while firms providing professional/scientific services and those providing health care and social services are the least optimistic about future business conditions in the local economy.

With regard to future activity at the firm level, firms in finance and insurance and in the personal services sectors reported the strongest inclination for expanded activity over the next six months (see Table 2). Firms indicating a less favorable outlook in June 2003 compared to March 2003 about their level of activity over the next six months include those in retail and wholesale trade and the professional and scientific services.

Survey Responses
Disaggregated by Sector/Activity

Summary:

At the end of the second quarter of 2003, business expectations about conditions in the local economy were more optimistic compared to expectations at the end of March 2003. However, this was not accompanied by significant changes in the percentage of reporting firms that expect to hire more employees, raise their selling, or increase capital expenditures. A comparison of the future activity index across sectors indicates that between the March 2003 and June 2003 surveys, firms in retail and wholesale trade, as well as firms providing and professional and scientific services are least optimistic about their prospects for expansion. Meanwhile, firms in finance and insurance and in the personal services sector indicated plans for expansion in their activities in the next six months.