September 2003

Sustained Optimism about Business Conditions in the
Local Economy into the First Quarter of 2004

The September 2003 Business Outlook Survey for the local area found that area firms expect continued improvement in economic conditions in the fourth quarter of 2003 compared to their expectations at the end of June 2003. The Business Outlook Index rose from 47 to 60 between the June 2003 and September 2003 surveys. The most recent survey found that 62 percent of reporting firms felt that future business conditions are likely to improve while 2 percent indicated that conditions are likely to get worse. In comparison, the June 2003 survey found that 54 percent of the reporting firms anticipated improved business conditions while 7 percent expected worsening conditions.

Summary of Returns
  September 2003

The percentage of firms reporting anticipated expansion in future levels of activity increased between the June 2003 and September 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 fell from 56 percent to 44 percent.

The September 2003 survey indicated that about 49 percent of reporting firms experienced higher sales and about 26 percent experienced lower sales in the past six months compared to sales in the second and third quarters of 2003. 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 47 percent to 44 percent between the June 2003 and September 2003 surveys.

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

Currently, businesses providing personal services and finance and insurance services are the most optimistic about future business conditions in the local economy, while firms providing real estate and construction services are the least optimistic about future business conditions in the local economy.

With regard to future activity at the firm level, firms in retail and wholesale trade and in the personal services sectors reported the strongest inclination for expanded activity over the next six months. Firms indicating a less favorable outlook in September 2003 compared to June 2003 about their level of activity over the next six months include those providing professional, scientific, and communications and information services..

Survey Responses
Disaggregated by Sector/Activity

Summary:

At the end of the third quarter of 2003, business expectations about conditions in the local economy were more optimistic compared to expectations at the end of June 2003. However, this was not accompanied by significant changes 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 indicates that between the June 2003 and September 2003 surveys, firms providing professional, scientific, communications and information services are least optimistic about their prospects for expansion. Meanwhile, firms in wholesale and retail trade, manufacturing, health care, and in the personal services sector indicated plans for expansion in their activities in the next six months.