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 September 2005

Businesses Anticipate Deterioration in Business
Conditions in the Local Economy
over the next six months

Download the
September 2005 Survey
in pdf format

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Expectations of Business Conditions in the Evansville Area Economy for the next 6 months

According to the September 2005 Business Outlook Survey a net - 5 percent of respondents expect general business conditions to deteriorate over the next six months. This represents a precipitous decline from 17 percent in the June 2005 survey. With regard to own activity, the net percent of reporting firms expecting to increase activity in the next six months was 38 percent.  The more favorable outlook about general business conditions was most evident among financial institutions.

The September 2005 survey indicated that about 47 percent of reporting firms experienced higher sales and about 20 percent experienced lower sales in the past six months compared to sales in the fourth quarter of 2004 and the first quarter of 2005. In addition, the past six months witnessed a decrease in the percentage of firms indicating increased employee compensation from 64 percent to 51 percent between the June 2005 and September 2005 surveys. Between the June 2005 and September 2005 surveys, the percent of reporting firms indicating that they expect most of their future e-commerce activity to be business-to-business transactions rose from 42 percent to 56 percent.

Summary of Returns
June 2005

Questions

Response

Improve/
Increase

Same

Worse/
Decrease

Unsure

(Percentage of Total Responses)
Business conditions in local economy in next six months 20 52 25 3
Level of activity of your firm in next six months 43 51 5 1
Capital expenditures of your firm in next six months 26 59 12 3
Employment by your firm in next six months 38 59 3 0
Average selling price of your firm in next six months 45 35 2 18
Access to financing by your firm in next six months 5 59 26 10
Employee compensation by your firm in last six months 51 47 2 0
Sales in last six months compared to previous six months 47 33 20 0

Survey Responses
Disaggregated by Sector/Activity

Questions by Industry

Response

Improve/
Increase

Same

Worse/
Decrease

Unsure
Manufacturing

(Percentage of Total Responses)
Business conditions in local economy in next six months 0 70 30 0
Level of activity of your firm in next six months 50 50 0 0
Construction
Business conditions in local economy in next six months 33 0 67 0
Level of activity of your firm in next six months 0 100 0 0
Real Estate
Business conditions in local economy in next six months 0 100 0 0
Level of activity of your firm in next six months 25 75 0 0
Retail & Wholesale Trade
Business conditions in local economy in next six months 20 27 40 13
Level of activity of your firm in next six months 27 53 13 7
Professional & Scientific Services
Business conditions in local economy in next six months 25 75 0 0
Level of activity of your firm in next six months 63 37 0 0
Health Care & Social Services
Business conditions in local economy in next six months 20 60 20 0
Level of activity of your firm in next six months 40 40 20 0
Other Services
Business conditions in local economy in next six months 50 50 0 0
Level of activity of your firm in next six months 50 50 0 0
Communications and Information
Business conditions in local economy in next six months 33 67 0 0
Level of activity of your firm in next six months 67 33 0 0
Finance and Insurance
Business conditions in local economy in next six months 60 40 0 0
Level of activity of your firm in next six months 100 0 0 0

Summary:

Results from the September 2005 survey indicate a substantial decline in expectations about general business conditions in the local economy, reinforcing a trend of declining sentiment that began with the June 2004 survey.  Over the past four years survey respondents have identified the following important challenges to their activities:  health care expenses for employees, availability of employees, competition from other businesses, and quality of labor.  In the most recent survey, three of the four have been identified as the most pressing problems.  Consistently, over the past year, firms are more optimistic about their own prospects compared to what they think will be happening to the overall economy. The most recent survey found that 20 percent of reporting firms felt that future business conditions are likely to improve while 43 percent expect an expansion in activity level during the next six months.

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For additional Information:

Professor Mohammed Khayum
Department of Economics & Finance

Phone: 812/465-1681
Email: mkhayum@usi.edu

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University of Southern Indiana

College of Business
8600 University Boulevard
Evansville, Indiana 47712