Business Confidence Wanes Amid Global Uncertainty

Posted by Andre Mayer on Sep 1, 2015 2:31:47 PM

The Associated Industries of Massachusetts Business Confidence declined 2.1 points in August to 57.1 as negative news on the global economy culminated in financial turmoil in China and worldwide.

BCI.August.2015“While the U.S. economy is chugging along, Europe, Canada, and Japan are slumping, and China’s slowing growth was dragging down the world economy even before the crisis in its financial markets,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“In fact, tracking the responses to our survey, those at the end of the month, when stock markets were sliding internationally, were no more negative than earlier returns.”

Torto noted that the Index at 57.1 remained solidly positive and above its level of a year before (54.2).

“We do see weakening from last August on specific questions,” he went on, “including those about conditions beyond the state and about future trends. We also see less confidence among manufacturers. All of these point to concerns about global economic conditions and their potential impact on the domestic economy, even as current business conditions register as favorable.”

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The Massachusetts Index, assessing business conditions within the Commonwealth, lost eight-tenths to 56.7, but was up nine-tenths from last August. The U.S. Index of national business conditions, at 50.7, was down 2.6 from July and 1.2 from a year before.

The three sub-indices bearing on survey respondents’ own operations all fell in August.  The Company Index, reflecting overall business conditions, lost 2.3 points to 59.4; the Sales Index was off 2.6 to 60.6; and the Employment Index was down 2.0 to 55.2.

“The numbers are still strong, but there is some erosion due to concerns about the future,” said BEA member Paul Bolger, President, Massachusetts Capital Resource Company.

 “For example, whereas 41 percent of respondents reported adding staff in the previous six months while 18 percent reduced employment, expectations for the next six months ran 27 percent adding and 15 percent cutting – positive but slower job creation.”

Confidence levels in August were slightly higher outside Greater Boston (57.5, +1.7) than within it (57.0, -4.3. Employers in the manufacturing sector were less positive (52.4, -3.3) than other employers (61.8, -1.1).

“Our August Business Confidence Survey reveals something significant about how global uncertainties are felt among employers,” said Richard C. Lord, President and CEO of AIM and a BEA member.

“Larger employers, who might be thought to be most exposed, remain very confident. The smallest firms, though less positive about general conditions, rate their own positions very favorably.

"Companies in the range of 26 to 100 employees, by contrast, are markedly less confident that they control their own fates, because many still find themselves in precarious circumstances after the disruptions of the past eight years, and they are often the most affected by changing regulations and labor standards. The stabilization of these firms, a vital locus of employment growth and of innovation in our state’s economy, remains a work in progress.” 

Topics: AIM Business Confidence Index, Massachusetts employers

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