Confidence among Massachusetts employers ebbed for a third consecutive month in June as uncertainty in Greece, Europe and China outweighed a strengthening economy at home.
The Associated Industries of Massachusetts Business Confidence released this morning declined by one point in June to 56.3, extending its decline from March’s post-recession high of 60.2. Confidence remained well above the 50-point level that signifies optimism, and 2.6 points better than in June 2014.
The Massachusetts Index, assessing business conditions within the Commonwealth, at 56.9, was the biggest gainer on both the month (+1.0) and the year (+6.0). The U.S. Index of national business conditions was up 0.7 from May and 2.6 from last June at 50.8.
“The first quarter of 2015 was a very weak one for the economy, but a strong one for the AIM Index, which gained each month; whereas the second quarter, though much better in terms of economic growth, has seen three monthly losses,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.
“The two indicators of domestic business climate actually rose in June,” he pointed out. “Meanwhile, the sub-indices related to survey respondents’ own operations lost ground, which we interpret as reflective of growing uncertainty. Events overseas, in China and in Greece and the Eurozone, are casting shadows on relatively good conditions at home.”
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 bullish view of the Massachusetts economy represents a profound change in employer attitudes over the 24 years that AIM has published the Business Confidence Index, according to association President and Chief Executive Officer Richard C. Lord.
“In July 1991, the Massachusetts Index of in-state conditions was at 25.8, about half the U.S. Index’s 51.2; it took 65 months for the state indicator to surpass its national counterpart, and 78 months to do so two months in a row. By contrast, the Massachusetts Index has now outpaced the U.S. Index for 73 consecutive months,” Lord said.
“Much of this improvement in employer’ perception of Massachusetts business conditions is due to a positive engagement with employer issues on the part of elected officials of both parties.”
Employer evaluations of their own business prospects weakened last month amid financial concerns on two continents.
The Current Index, which assesses overall business conditions at the time of the survey, was off 1.2 points on the month at 56.2, while the Future Index, measuring expectations for six months out, lost seven-tenths to 56.4. The Company Index, reflecting overall business conditions, lost 2.2 points 58.0; the Sales Index was off 2.1 to 57.9; and the Employment Index was down 3.3 to 54.7.
“These are still positive numbers, revealing wariness rather than fear about the second half of 2015,” said Michael A. Tyler, CFA, Chief Investment Officer, Eastern Bank Wealth Management, a BEA member.
“Greece is a small economy and a tiny market for Massachusetts exports; despite talk of contagion to Spain or Italy, the Eurozone isn’t collapsing and there isn't likely to be any meaningful impact in the U.S. or Massachusetts. China’s economic slowdown is a more substantive matter, one that American investors rightly should be watching carefully.”