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Report: State’s economy staggered by outside events

A third-quarter survey by the University of Baltimore’s Jacob France Institute has found t Maryland’s economy has been “staggered” by the gridlock in federal spending and the European debt crisis.

The Maryland Business Climate Survey found that stands in marked contrast to its findings in the second quarter, when business owners in Maryland said they were optimistic about the state’s economy.

One bright spot is that overall sales growth continues to hold steady, according to the report, produced every quarter by the institute at UB’s Merrick School of Business.

“It appears that the general improvement in expectations for an economic recovery that we were seeing during the first half of the year have evaporated,” said Richard Clinch, director of economic research at the Jacob France Institute, in a statement.

“Across the board, all over the state, we’re finding that Maryland firms have ratcheted back their expectations for market expansion, with just over half expecting their market to expand in the coming year—that’s down from 63 percent in the first and second quarters,” Clinch said. “About 20 percent of the businesses in our survey are expecting declines, and that’s more than double the level of the previous two quarters.”

The report snapshots Maryland’s economy by surveying 250 companies, looking at employment, sales and employment data.

The third-quarter results show that Maryland business owners are less optimistic. Just over half of reporting firms said they expect an increase in their sales volume during the remainder of 2011 – a drop of more than 10 percentage points from the second quarter.

Clinch said factors behind the pessimism are many and varied. He highlighted two: the political impasse in Washington and growing fears that the debt crisis in a number of countries in Europe will impact economic affairs here at home.

“It’s both of those things, but it’s clear that Washington gridlock is a factor,” Clinch said. “As the federal government struggles to find a way to lower its deficit spending or narrowly avoids another shutdown, it’s hitting Maryland’s vital government contracting sector pretty hard — businesses of all kinds in the D.C. suburbs are suffering. This is a significant break from the past because that part of the state has nearly always reported both stronger performance and higher expectations for market expansion and job growth than anywhere else in Maryland. It could become a drag on the economy of the entire state.”

Maryland was ranked third nationally in per capita government spending and second nationally in per capita procurement in Fiscal Year 2010.