Maryland Survey of Business Activity

2010

 

November 24, 2010

Business Activity Increases in November; Expectations for Future Activity Improve Sharply

 

Overview

According to the latest survey results, business activity rose solidly in November. The general business activity index increased to 24 from 4 in October, its highest reading since April. Respondents reported that sales and customer traffic increased for the month while labor conditions remained weak. Employment and the average workweek both edged lower. Pricing conditions remained weak with respondents indicating another decline in November. Expectations for activity in the future rose sharply with two-thirds of the respondents anticipating greater business activity six months from now.

Current Activity

The latest survey results indicated that business activity grew solidly in November as the general business conditions index increased to 24 from 4. The reading almost matches the series high of 25 registered in April. The sales index rose to 11 from 5 while the customer traffic and inquiries index increased by eighteen points to 14 after posting its first negative reading since February when business activity was negatively impacted by the snowstorms. The inventories index dropped further into negative territory in November, to −23 from −9, despite the improvement in sales. Somewhat unexpectedly, investment in new equipment and software rose for the month with the index reaching its highest level since the beginning of the survey in September 2007.

Respondents' assessment of the state and national economy improved considerably in November. The business activity indexes for the state and the nation turned positive for the first time since June — before the slowdown in the economy over the summer. The state activity index rose to 20 while the national index rose to 24. Both indexes were at −6 in October.

General Business Activity

Employment

According to the survey results, labor market conditions remained lackluster. Participants reported a slight decrease in employment and weekly hours. The number of employees index remained at −2 while the index of weekly hours declined to −2 from 6. Respondents also reported a modest increase in average wages for the month. Despite weak conditions in current activity, a number of survey respondents anticipate an increase in business activity over the next six months that will result in a greater demand for labor.

Looking at respondents' expectations six months from now, the number of employees index increased to 30 from 23 last month while the weekly hours index rose 12 points to 27. Over 40 percent of respondents anticipate expanding their workforce over the next six months while roughly 12 percent expect to reduce their workforce.

Prices

Businesses reported that prices received for final goods and services continued to decline in November while prices for materials and energy increased. The prices received index declined to −20 from −12, its lowest reading since October 2009. Input price increases were more moderate in November with the prices paid for materials and energy indexes declining to 8.

The expectations index for prices received for final goods and services rose to 9 from −2, rebounding after unexpectedly dropping into negative territory in October. Expectations for increases in materials and energy prices over the next six months remained strong in November with both indexes essentially unchanged at 39 and 38, respectively.

Price Trends

Expectations

Expectations of economic activity six months from now rose sharply in November. The expectations index for general business activity at respondents' companies increased to 62 from 49 last month — its highest reading since the beginning of the survey in 2007. Roughly 75 percent of respondents anticipate greater business activity six months from now.

Expectations of economic activity for the state and national economy also rose with the state and national indexes rising twenty-two and six points, respectively, to 51 and 44. Over 50 percent of respondents expect the state and national economy to improve over the next six months while very few anticipate a decline.

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R. Andrew Bauer
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