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In a sign that Maryland's economy is expanding, businesses in the state reported strong sales and optimism in March -- stronger even than their competitors in the booming states to the south.

A Federal Reserve survey of its southeast district released yesterday showed that all the interviewed retail stores in Maryland, for example, saw increases in sales in March and expect to see further increases during the next six months.

In addition, half of all Maryland manufacturers interviewed reported increased sales last month.

Nearly one-third of Maryland manufacturers expected the boom to continue through September, which made Maryland the most optimistic of any state in the district, which also includes North Carolina, Virginia, West Virginia, South Carolina and Washington, "Maryland's economy doesn't appear to be as weak as its reputation" has tagged it over recent months, said Raymond Owens, the Federal Reserve economist in charge of service and retail sector surveys.

Maryland's economy, which has lagged the nation's for much of the recent recovery, "is showing a very strong rebound. . . . It is looking quite optimistic," he added.

Area businesses reported that they have noticed a surge in orders recently, but their optimism was tempered by worries about prices and interest rates.

Lee Rone, executive vice president of Tulkoff's Products Inc., NTC said March broke all sales records for the Baltimore-based horseradish maker.

But profits haven't kept pace with sales because suppliers, such as box and plastic container makers, raised their prices, while Tulkoff's hasn't raised its prices to customers. "I'm wondering and worrying a little bit" even though April sales have continued strong, Mr. Rone said.

Throughout the district, manufacturers said the prices of their supplies rose at an annualized rate of 4.34 percent in March, while they were only able to raise the prices of finished goods by a 1.25 percent annualized rate.

Marylanders reported a smaller gap, however. Local manufacturers said their prices rose at an annual rate of 2.08 percent, while they raised their prices at a 1.55 percent per year rate last month.

And while Maryland retailers didn't increase their prices last month, service-sector companies reported raising their prices by of a percent in March.

Overall, retailers throughout the district expect to raise their prices by about 1 percent in the next six months.

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