Maryland Survey of Business Activity



September 25, 2008

Economic Activity Continues to Decline; Survey Respondents' Outlook For Growth Drops Sharply



According to the results of the most recent survey, business activity in Maryland contracted in September. Survey respondents reported that the level of business activity dropped compared to the previous month. This represents the tenth consecutive decline in activity. The drop was widespread across different company indicators including sales, number of employees, and customer traffic. Looking ahead, respondents' expectations for economic activity six months from now declined sharply from August. A greater percentage of respondents now expect activity at their company to be lower six months from now than it is currently.

Current Activity

The decline in economic activity in September was sharpest in recent months. Respondents reported that sales activity continued to decline as the sales index edged down to −28 from −25 in August.

Conditions in the labor market also weakened considerably. At the same time, customer traffic declined sharply with the index dropping to −34 from −14 last month. The level of investment in new equipment and software declined notably. Coincident with the weaker economic environment, respondents indicated that prices received fell in September. The index for prices received dropped to −9 from 5 in August. A sizable majority of survey respondents also indicated that activity in the nation and the state also declined in September. The general business activity index for the nation and the state both fell sharply to −75 and −70, respectively.

General Business Activity


According to the survey, the labor market weakened notably in September with respondents indicating that employment and hours worked both fell during the month. The number of employees index dropped to −15 from −1 in August. At the same time, the index of weekly hours fell sharply to −23 from 6 in August. The September figures are the lowest to date and are a marked departure from recent readings. Prior to September, these indexes remained near zero for most of 2008, averaging 1 through August. In response to the general weakening of the labor market, firms reported that increases in average wages were more moderate in September and that skilled workers were less difficult to find.


Looking at prices, there was a decline in prices received by firms for their products and services in September after small gains in the previous two months. Prices paid by businesses continue to increase considerably. Firms surveyed continue to report higher prices for both materials and energy. However, the number of firms reporting increasing prices has tapered off from the higher levels registered in the spring and summer. From March to July, the prices paid for materials index averaged 58 while the prices paid for energy index averaged 82. In September, those indexes both stood lower at 53. Despite the recent declines, however, firms expect higher prices six months from now.

Price Trends


Expectations of economic activity six months from now fell sharply in September. Survey respondents indicated that they anticipate lower growth for the nation, the state, and at their company. Expectations fell across the board from August, likely in response to recent turbulence in financial markets and their potential impact on economic growth. While respondents have had a negative view of growth for the nation and the state since last fall, the view that activity will be lower for their company six months from now is new. The expectations index for business activity at respondents' company fell from 13 in August to −7 in September.  In addition, respondents indicated that they expect a more moderate increase in employment, customer traffic, and prices received over the next six months. At the same time, they expect weekly hours, investment in new equipment and software, and product inventories to decrease over the next six months.

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Richard Kaglic
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