BOSTON — Confidence among Massachusetts employers weakened considerably during June as tariffs, rising raw-material costs, and approval of paid family and medical leave in the Bay State raised concerns about business growth.
The Associated Industries of Massachusetts (AIM) Business Confidence Index dropped 5.3 points to 61.3 last month, its lowest level since August 2017. Confidence remains well within the optimistic range, but the June decline left the BCI slightly below its level of a year ago.
Though analysts say the volatility in business confidence during May and June may reflect some statistical anomalies, the comments provided by employers on the monthly AIM survey suggest that companies are becoming increasingly concerned about a perfect storm of issues on the federal and state levels.
“It is certainly significant that the AIM Business Confidence Index is lower than it was in June 2017. It is also significant that many of the individual indicators that make up the overall index — ranging from employer hiring plans to their views of the Massachusetts economy — are also lower than they were a year ago,” said Raymond Torto, chair of AIM’s Board of Economic Advisors (BEA) and lecturer at Harvard Graduate School of Design. “It will be interesting to see how confidence changes during the summer as Massachusetts continues to operate at virtually full capacity.”
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. It has remained above 50 since October 2013.
The constituent indicators that make up the overall Business Confidence Index all lost ground during June. The Massachusetts Index assessing business conditions within the Commonwealth fell 7.2 points to 62.8, leaving it 1.4 points lower than in June 2017. The U.S. Index ended the month at 60.0, down 9.3 points for the month but 2.6 points better than a year ago. June marked the 100th consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.
The Current Index, which assesses overall business conditions at the time of the survey, declined 2.6 points to 63.5. The Future Index, measuring expectations for six months out, fell 7.5 points to 59.1. The Current Index gained 1.6 points during the year, while the Future Index lost 2.6 points.
Employer views of their own companies also weakened. The Company Index declined 3.3 points to 61.2, down 1.2 points for 12 months. The Employment Index ended the month at 55.0, a 3.3-point decrease for the month and 3.1 points lower than a year ago. The Sales Index lost 2.9 points for the month and 0.2 points for the year.
Manufacturing companies (62.5) were slightly more optimistic than non-manufacturers (60.2). Companies in the eastern part of Massachusetts (63.3) were more bullish than those in the west (58.7).
“It’s interesting to note that medium and small companies remain significantly more optimistic than larger companies, reversing the typical pattern,” said Edward Pendergast, managing director at Dunn Rush & Co. “Entrepreneurial companies continue to drive growth here in Massachusetts.”