Local businesses have mixed feelings about the prospects for the economy, following a year of double-digit gross domestic product growth, according to a survey by Dun & Bradstreet. The survey, conducted in December by the business information provider and covering 500 companies in different industries, showed that firms in Hong Kong were generally optimistic about the operating environment in the first quarter of this year. The overall expectation index went up six points from the previous quarter to 12, indicating continued optimism in the business environment. Compared to the first quarter of last year, the index was down nine points from 21. Although major indices regarding sales, profits and employment remain positive, they have seen a downward adjustment from the same period last year. Lawrence Yee, Dun & Bradstreet vice-president and general manager of Greater China and Korea, said companies were making conservative projections after a year of high growth rates. 'Compared to the same quarter last year when the economy began to make a rebound, major indices have dropped,' he said. 'Businesses appear to have taken a more pragmatic view on economic growth following a high growth year.' The overall sales expectation index for the first quarter stood at 23, representing a decrease of 20 points year on year and four points from the previous quarter. The sharpest decline was seen in the retail sector, where the index went down from 52 a year earlier to seven. This was followed by the service sector, where the index went down by 20 points to 14, and the wholesale sector, also down 20 to 40. The sales projections made by the retail sector reflected the slow recovery of the consumer market in Hong Kong, the survey said. According to figures released by the Census and Statistics Department, retail sales last year increased by 8 per cent in volume over 1999. But with prevailing deflation, this translated into an increase of just 4 per cent in value terms. Based on the seasonally adjusted series, the volume of retail sales actually went down by 2 per cent in the three months to December compared with the preceding three-month period. According to the Dun & Bradstreet survey, the overall profits expectations index also showed a downward trend, from 37 in the first quarter of last year to 12 in the first three months of this year. In particular, the profit expectations index for retailers stood at minus 8, which represented a 60-point decline from a year earlier. Some respondents attributed this to rising operating costs and the rollout of the Mandatory Provident Fund scheme. The overall employment index also showed a slight year-on-year decline to two points. Except for the wholesale and service sectors, which intended to maintain their staffing levels, other sectors said they would reduce hiring. 'While economic indicators are generally pointing towards a positive trend, there appears to be a mix of positive and negative sentiments towards full recovery,' said Mr Yee. 'While the downward trend in interest rates may increase business lending and consumer spending, competition from neighbouring countries and the performance of the US economy will continue to affect business optimism.'