Business Confidence Falls Again in June
Confidence among Massachusetts employers edged close to pessimistic territory in June as businesses struggled with surging inflation and concerns about a possible recession.
The Associated Industries of Massachusetts Business Confidence Index (BCI) fell 3.9 points to 50.8. The Index now rests 12.6 points lower than a year ago and marginally higher than the 50 mark that separates an optimistic from a pessimistic view.
The decline, which left the Index at its lowest point since December 2020, reflects particular concern about the course of both the state and national economies. The BCI’s US Index plummeted 9.1 points for the month and more than 20.3 points for the year.
The Central Massachusetts Business Confidence Index, conducted with the Worcester Regional Chamber of Commerce, fell from 57.5 to 49.0. The North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, dropped from 61.8 in May to 52.6 last month.
The confidence numbers came at a time when 76% of CEOs globally tell The Conference Board that they expect a recession by the end of 2023 or believe it’s already here. The economy appears to be growing, but employers face growing struggles with soaring fuel prices, supply chain disruptions and financial market volatility.
“Central banks around the world are raising interest rates with new urgency, hoping to cool inflation by slowing growth of aggregate demand and achieving a closer balance with supply,” said Sara L. Johnson, Chair of the AIM Board of Economic Advisors.
“Capital markets remain open, but financing costs are rising for businesses, consumers, home buyers, and governments. The year ahead will bring a more difficult environment for builders and capital good producers.”
The constituent indicators that make up the Index were uniformly lower in June.
The Massachusetts Index assessing business conditions within the Commonwealth shed 6.6 points to 47.2, down 16.4 points since June 2021. The US Index measuring conditions throughout the country fell to 38.6.
The Current Index, which assesses overall business conditions at the time of the survey, declined 3.3 points to 53.4. The Future Index, measuring projections for the economy six months from now, lost 4.6 points to 48.1.
The confidence employers have in their own companies declined 2.6 points to 56.0, ending the month 8.7 points lower than in June 2021.
The Manufacturing Index fell 5.2 points to 49.3, 11.6 points less than a year ago.
Small companies (52.6) were more optimistic than large companies (50.2) or Medium-sized companies (49.8).
Elmore Alexander, Dean Emeritus of the Ricciardi College of Business, Bridgewater State University, and a BEA member, said the Russian invasion of Ukraine and COVID-19 lockdowns in China have added to the supply chain woes experienced by Massachusetts employers.
“Elevated demand continues to collide with supply restraints and most economists believe inflation will remain above the Federal Reserve’s 2% target through the end of 2023,” Alexander said.
AIM President and CEO John R. Regan, also a BEA member, noted that recent polls find that among all of the vexing issues facing the commonwealth, Massachusetts residents remain most concerned about the economy and jobs, inflation, housing costs and taxes.
“The citizens of Massachusetts clearly understand that economic growth and jobs form the basis of their ability to establish a stable life and raise a family. The emphasis on jobs is especially notable at a time of an acute labor shortage that has allowed workers participating in the ‘Great Resignation’ to pretty much have their pick of new positions,” Regan said.