According to the latest survey results, business activity in Maryland rose solidly in December. The general business activity index registered 20, down slightly from 24 last month. Sales increased for the month while labor conditions remained lackluster. Pricing conditions remained weak with respondents indicating a decline in prices for final goods and services in December. However, respondents expect prices to firm over the next six months. Expectations for activity in the near future remained strong with over fifty percent of respondents anticipating greater business activity six months from now.
Business activity grew solidly in December as the general business conditions index registered 20, down slightly from 24 last month. The sales index rose from 11 to 22, near the series-high posted in April of this year. Sales have steadily risen over the past five months and have been in positive territory for nine out of the last ten months.
The survey was changed to include additional questions on business spending. The results for December indicate that spending on business services and capital expenditures (new questions) rose moderately in December. Spending on equipment and software (which was an original survey question) rose for a second straight month with the index reaching its highest level since the beginning of the survey in September 2007.
According to the survey results, labor market conditions remained lackluster. Participants reported a slight increase in employment and a jump in the average workweek (previously reported as weekly hours). The number of employees index edged higher to 2 from −2 while the average workweek index rose twenty-six points to 24. 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 registered 17, down from 30 last month. The average workweek index dropped to 2 from 27. Despite the declines, close to thirty percent of respondents anticipate expanding their workforce over the next six months while roughly fifteen percent expect to reduce their workforce.
Businesses reported that prices received for final goods and services continued to decline in December while input prices rose. Previously, the survey asked participants if prices were higher or lower than in the previous month as well as their expectation for price changes over the next six months. Now the survey asks participants to give a numerical price change for the month as well as for the next six months.
The December results were consistent with previous results which indicated protracted weakness in output (or final goods and services) prices and increases in materials and energy prices. Specifically, the average price change for input prices was close to 3 percent while output prices declined by less than 1 percent in December. Respondents anticipate input prices to grow at a faster rate over the next six months, by 4.4 percent, and expect output prices to firm and to edge higher by 0.7 percent.
Expectations of economic activity six months from now decreased in December but remained strong. The expectations index for general business conditions dropped to 41 from 62 in November while the sales expectation index declined thirty-two points to 29. Still, close to fifty percent of respondents anticipate an increase in sales and improved business conditions over the next six months.
R. Andrew Bauer