Although the financial condition of the business sector is generally quite strong, several areas of structural weakness are evident, notably in the automobile and airline industries. Despite these  2  BIS Review 13/2006  problems, however, favorable conditions in the business sector as a whole should encourage continued expansion of capital investment.
For the most part, the financial situation of state and local governments has improved noticeably over the past couple of years. Rising personal and business incomes have buoyed tax revenues, affording some scope for increases in state and local government expenditures. At the federal level, the budget deficit narrowed appreciably in fiscal 2005.