There is no Alan Greenspan-style “irrational exuberance” among Massachusetts employers these days.
The people who run businesses throughout the commonwealth remain confident about the overall state of the economy, but a global growth slowdown and domestic political uncertainty are leaving them more circumspect than in the spring.
The Associated Industries of Massachusetts Business Confidence Index shed 1.2 points in September to 55.9, leaving it a point and a half above its reading of last September (54.4). The average confidence reading during the third quarter of 2015 was 57.4, barely below the second quarter (57.6) and higher than the fourth (56.3) and third (54.9) quarters of 2014.
“Although this is the Index’s fifth decline in six months, the trend is more sideways than downward,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.
“While the economy has been chugging along at present, business confidence appears to have suffered as a result of concerns about future uncertainties…Internationally, the slowdown in China sidelines one of the principal engines of global growth, while our other major export markets – Western Europe, Canada, Japan – are all weak.”
Release of the Business Confidence Index comes five days after the government announced dismal employment numbers for September and two weeks after the Federal Reserve decided that the economy remains too fragile to raise interest rates from their near-zero level.
AIM’s Business Confidence Index has been issued monthly since July 1991 under the oversight of the Board of Economic Advisors. Presented on a 100-point scale on which 50 is neutral, the Index attained a historical high of 68.5 in 1997 and 1998; its all-time low was 33.3 in February 2009.
The sub-indices based on selected questions or respondent characteristics were mostly down from August to September, but mostly up compared to September 2014. The U.S. Index assessing national business conditions edged off a tenth to 50.6, while Massachusetts Index of conditions within the Commonwealth lost two points to 54.7.
“The commonwealth’s economy is currently performing very well, with strong job creation and solid GDP growth,” said BEA member Michael D. Goodman, Executive Director of the Public Policy Center at UMass Dartmouth. “Despite some significant sectoral and regional imbalances, Massachusetts has consistently outpaced the national economy throughout the recovery and expansion periods, and the state’s industry mix is helping to buffer it from the full impact of a slowing global economy.”
The Company Index, which assesses the overall situations of their operations, was off 1.3 points at 58.1; the Sales Index lost 2.9 to 57.7; and the Employment Index was down half a point at 54.7.