According to the latest survey results, business activity in Maryland expanded moderately in June. The general business conditions and sales indexes registered 19 and 16, respectively. Labor market conditions improved notably with the number of employees index increasing ten points to 27 and business investment increased at a brisk pace. Expectations for business activity in the near term remained positive although moderated somewhat from recent months. Thirty-seven percent of respondents anticipated greater business activity six months from now while 17 percent expected activity to decline.
Business activity increased moderately in June as the general business conditions and sales indexes registered 19 and 16, respectively. The general business conditions index registered a double-digit reading for a fifth consecutive month--averaging 19 over the past five months, a significant improvement from the previous five months where the series averaged -2. Likewise, the sales index recorded its fourth consecutive double-digit reading, averaging 19 over those months versus -5 over the prior five months. Spending on business services increased at a moderate pace as the index registered 9, down one point from last month. Capital expenditures increased at a faster pace than last month. The total capital expenditures index registered 20, up six points from last month while the index for expenditures on equipment and software edged down one point to 26. Business investment in new equipment and software also showed noticeable improvement over the past five months—with the index averaging 20 versus 2 over the prior five months.
The June survey results indicated improvement in labor market conditions for a fourth consecutive month. The number of employees index registered 27, up ten points from May. Thirty-five percent of respondents indicated that they added workers for the month while 8 percent reported a decline. The average workweek series rose to 11 from 6 and the wage index registered 24, up three points from last month. Twenty-seven percent of respondents reported higher wages in June while 3 percent reported a decline.
Expectations for future labor market conditions remained positive. The number of employees expectations index rose four points to 28 and has been above 20 for the past seven months. The percentage of firms anticipating hiring over the next six months edged higher to 36 percent from 32 percent, while the number of respondents indicating that they planned on reducing their workforce was unchanged at 8 percent.
Businesses indicated that prices paid for inputs and for outputs rose at a modest rate in June. Respondents reported that input prices rose 1.5 percent in June on an annualized basis, down 0.8 percentage point from 2.3 percent last month. Output prices rose by 1.6 percent on an annualized basis, up one percentage point from May. Businesses expected profit margins to remain under pressure over the next six months. Input prices were expected to increase at a 2.0 percent annualized rate over the next six months, while output prices were expected to increase by 1.8 percent.
Expectations of economic activity six months from now were positive in June although moderated from recent months. The expectations index for general business conditions dropped ten points to 20 while the sales index decreased six points to 14. Thirty-seven percent of respondents expected business conditions to improve, down slightly from 40 percent last month, while 17 percent of respondents expected conditions to worsen, up from 10 percent last month. Thirty-nine percent of respondents anticipated sales to increase over the next six months while 14 percent expected sales to worsen.
Overall the June survey results indicated that the Maryland economy improved for a fifth consecutive month after a slowdown in business activity that began in the fall of 2013. Respondents reported a solid increase in general business conditions, sales and business investment. Labor market conditions improved for a fourth consecutive month with a notable increase in hiring. The more positive survey results over the past several months suggest that the negative impact from cuts to federal spending is lessening and that the Maryland economy is regaining its footing.
R. Andrew Bauer