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Richmond Fed’s Maryland Business Activity Survey: January (Text)

Following is the text from the Richmond Fed’s Maryland Business Activity Survey.

According to the latest survey results, business activity in

Maryland was essentially flat in January. The general business

activity index registered −2 for the month, down 9 points from

December. The sales index edged higher to a reading of 5.

Business expenditures on services and capital investment were

flat. Labor market conditions weakened as more firms indicated

that they shed workers than added workers in January.

Profit margins continued to come under pressure with increases in

input costs outpacing output prices. Despite weaker conditions in

December, expectations for activity in the near future remained positive.

Forty-five percent of respondents anticipated greater business activity

six months from now while twelve percent expected activity to decline.

Current Activity

Business activity edged lower in December as the general business

activity index registered −2, declining 9 points from last month. Sales

increased modestly, however, as the sales index increased 5 points to 5.

After modest increases in November and December, business spending

weakened in January. Spending on business services dropped 11 points to

a reading of −2--its weakest reading since December 2011. Total capital

expenditures declined 7 points to 2, also the lowest reading since

December 2011. Spending on equipment or software decreased to 5 from

17 last month, a significant drop from the average of 18 over previous

six months.


According to the survey results, labor market conditions deteriorated in

January as a greater number of respondents indicated that they shed workers

than added workers. The employment index registered −10--down from −7 in

December. Fifteen percent of respondents indicated that they added workers

for the month; however twenty-four percent reported a decline. This was the

first consecutive negative reading since the end of 2010. There was little

change in the workweek. The average workweek index was unchanged at 2.

Despite considerable slack in the labor market, respondents reported higher

wages in January. The wage index increased 4 points to 24.

Expectations for future labor market conditions remained relatively positive

in January, however. The number of employees index registered 15, down 5

points from last month. Nearly one in three respondents indicated that they anticipated expanding their workforce over the next six months while

seventeen percent anticipated reducing their workforce. Expectations remain

below where they were one year ago, however. The number of employees

expectations index peaked at 36 in March 2012 and steadily declined through

August where it reached zero and remained near that level in September.

In the October and November surveys, the index increased to 16 before edging

higher to 20 in December. While the last four months represent an improvement, expectations are still less than in early 2012 when 43 percent of respondents

in the April survey anticipated expanding their workforce.


Businesses reported that margins remained under pressure in January with

increases in input prices outpacing output prices. Respondents reported that

input prices rose 2.6 percent in January on an annualized basis. Output prices reportedly increased at a faster rate in January than in previous months, by

1.7 percent at an annual rate. Businesses expected profit margins to remain

under pressure over the next six months. Input prices were expected to

increase at a 3.0 percent annualized rate while output prices were

expected to increase by 2.2 percent.


Despite weaker activity in January, expectations of economic activity

six months from now improved. The expectations index for general business conditions edged lower to 33 from 37 in December. The sales index also

decreased by 4 points to 36. Roughly forty-five percent of respondents

in the January survey expected business conditions and sales to improve

over the next six months. Just seven percent expected business conditions

to worsen. Overall the January survey results indicated that business

activity was flat or edged slightly lower in January while expectations

for future activity remained positive. Notably, despite the modest and

uneven pace of growth and uncertainty related to the U.S. economic outlook, respondents continued to be more positive about the outlook over the near


SOURCE: Federal Reserve Bank of Richmond *T

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