AIM Reports Soaring Business Confidence in 2014

BOSTON — The Associated Industries of Massachusetts Business Confidence Index ended 2014 at 57.3, 7.1 points above last December’s level.

“This is the index’s highest reading since July 2007, before the Great Recession, and it concludes the best quarter since that period,” said Raymond Torto, chair of AIM’s Board of Economic Advisors (BEA) and lecturer at Harvard Graduate School of Design. “There is reason to believe, moreover, that this upwelling in confidence will prove more lasting than the increase of early 2012, which was undone by fiscal conflict in Washington.”

In 2014, Torto noted, “business confidence survived a stress test of economic contraction in the first quarter, then gained in eight of the last 10 months of the year. Fundamentals are looking much better — unemployment is down and job creation is running strong nationally and in Massachusetts, which shows up in rising consumer confidence; the federal deficit and the trade deficit are shrinking; and, of course, the stock market has done well. Despite significant areas of weakness in the global economy, Massachusetts employers have ample cause to be optimistic.”

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 sub-indices based on selected questions or categories of respondent experienced a mix of gains and losses from November to December, but all were up from a year before. The Massachusetts Index, assessing business conditions within the Commonwealth, added one point on the month to 56.1, and the U.S. Index of national business conditions was up four-tenths to 50.1.

“This is the third time since the recession that U.S. Index reached 50, but so far it has not held that level,” said BEA member Paul Bolger, president of Massachusetts Capital Resource Co. “Respondents with 100 or fewer employees still tend to rate national conditions negatively, while larger firms are on the positive side. Compared to last December, the state indicator was up 9.1 points, while its national counterpart gained 5.3 points.”

The Current Index, which assesses overall business conditions at the time of the survey, was up 1.2 points to 56.2, while the Future Index, measuring expectations for six months out, shed one-tenth to 58.4. The annual gains were 7.6 and 6.8, respectively.

“These results point to business conditions that are fairly good and improving, though by no means booming,” Bolger noted. “For some employers, the recession is in the past, while others are finding success elusive in a changed environment.”