March 2003

Area Firms Expect Slowdown in the Local Economy
between April and September 2003

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March 2003 Survey
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The March 2003 Business Outlook Survey for the local area found that area firms expect less favorable economic conditions in the second and third quarters of 2003 compared to their expectations at the end of 2002. The Business Outlook Index fell from 37 to 31 between the December 2002 and March 2003 surveys. The most recent survey found that 43 percent of reporting firms felt that future business conditions are likely to improve while 12 percent indicated that conditions are likely to get worse. In contrast, the December 2002 survey found that 47 percent of the reporting firms anticipated improved business conditions while 10 percent expected worsening conditions. 

Summary of Returns
 March 2003
(Table 1)

The percentage of firms reporting anticipated expansion in future levels of activity fell from 41 percent to 36 percent between December 2002 and March 2003. Between the last two business outlook surveys, the proportion of firms reporting that their levels of economic activity are likely to remain unchanged rose from 45 percent to 54 percent.

The March 2003 survey indicated that about 30 percent of reporting firms experienced lower sales and about 33 percent experienced improved sales in the past six months compared to sales in the second and third quarters 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 fell from 48 percent to 46 percent between the December 2002 and March 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, poor sales, taxes, and competition from other businesses.

Currently, businesses providing communications and information services and manufacturing firms are the most optimistic about future business conditions in the local economy, while firms in real estate, retail and wholesale trade, 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 health care and social services, retail and wholesale trade, 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 March 2003 compared to December 2002 about their level of activity over the next six months include those in manufacturing, construction, and the professional and scientific services.

Survey Responses
Disaggregated by Sector/Activity
(Table 2)

Summary:

At the end of the first quarter of 2003, business expectations about conditions in the local economy were lower compared to expectations at the end of December 2002. This sentiment was reflected in decline in the percentage of reporting firms that expect to hire more employees or raise their selling prices. A comparison of the future activity index across sectors indicate that between the December 2002 and March 2003 surveys, firms in manufacturing, construction, and professional and scientific services are less optimistic about their prospects for expansion. However, firms in the real estate, wholesale and retail trade, and health care sectors, indicated plans for expansion in their activities in the next six months.