Maryland Survey of Business Activity



June 24, 2010

Business Activity Increases for the Fourth Consecutive Month: Sales and Customer Traffic Continue to Slowly Improve; Expectations Remain Positive



According to the latest survey results, business activity rose in June for the fourth consecutive month. The general business activity index registered 15, down slightly from 19 in May. Businesses reported an increase in sales, customer traffic and labor demand. However, prices continued to decline and businesses reported that investment activity remained weak. Expectations for activity six months from now remained strong, with a solid majority of survey respondents anticipating increases in general business activity. Respondents expect sales, labor demand, prices and investment to increase over the next six months.

Current Activity

The latest survey results indicated that business activity increased in June as the general business conditions index registered 15, down slightly from 19 last month. There was some moderation in the specific indicators of activity. The sales and customer traffic or inquiries indexes edged lower to 10 and 12, respectively, from 15 and 30. Taken with the moderation in the overall business activity indexes, it seems clear that that the pace of business activity slowed notably from April and May. Investment in equipment and software was flat in June while inventories declined after two months of increases, likely reflecting the softer activity for the month. Somewhat surprisingly, the business activity indexes for the state and the nation both fell sharply. While the indexes remained positive, survey participants have noted a considerable slowdown in business activity for the month. The state index dropped 24 points to 12 and the national index fell 28 points to 8.

General Business Activity


The June survey results indicate an improvement in the labor market in June. Participants reported an increase in employment and hours worked. The number of employees index rose to 8 from −9 while the index of weekly hours jumped to 21 from 4. Despite weak labor market conditions, the index for average wages remained positive at 8, up slightly from last month.

Survey respondents continue to anticipate an increase in business activity over the next six months that will result in greater labor demand. Looking at respondents' expectations six months from now, the number of employees index edged higher to 18 from 15 last month while the hours worked index rose 2 points to 14. Just over one-third of respondents anticipate expanding their workforce over the next six months while 18 percent expect to reduce their workforce.


Businesses reported that prices received for final goods and services continued to decline while prices for materials continued to increase in June. Energy prices however, were slightly lower for the month. The prices received index edged lower to −15 from −12 while the prices paid for materials index was essentially unchanged at 17. The energy price index dropped 27 points to −2. However, firms continue to expect pricing conditions to improve with final goods prices rising over the next six months. There are widespread expectations for prices of materials and energy to also increase over the next six months.

Price Trends


Expectations of economic activity six months from now remained solid in June. The expectations index for general business activity at respondent's companies increased by four points to 39. Fifty-seven percent of respondents anticipate greater business activity six months from now while 18 percent anticipate business activity to decline. Expectations for sales and customer traffic rose in June while expectations for investment and inventory accumulation moderated. Expectations of economic activity for the state and national economy moderated slightly, with the state and national indexes edging lower to 33 and 39, respectively.

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R. Andrew Bauer
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