Business Confidence Falls for Fourth Consecutive Month

BOSTON — Confidence among Massachusetts employers fell for a fourth consecutive month during November amid renewed COVID-19 concerns, supply-chain disruptions, and the highest rate of inflation in three decades.

The Associated Industries of Massachusetts (AIM) Business Confidence Index declined five-tenths of a point to 57.9 last month. The Index is now at its lowest level since March, though it remains 8.6% higher than a year ago.

Employer views of the U.S. economy turned pessimistic for the first time since January, while attitudes toward the Massachusetts economy also weakened slightly.

Overall confidence remains in optimistic territory. On the positive side, construction companies and other businesses involved in infrastructure work were buoyed by passage of the $1 trillion Infrastructure Investment and Jobs Act signed by President Biden on Nov. 15.

Employers remain concerned about their ability to obtain parts and materials.

“The only way we can continue to grow is to have the supply-chain disruptions come to an end and to have the labor shortages ease. We have had to turn away potential customers due to the inability to ensure delivery times,” wrote one employer who participated in the confidence survey.

Another wrote that “supply-chain disruption is placing a lot of strain on our ability to service our customers. I really believe the supply-chain challenges will be with us well into the later part of 2022. It’s a mess.”

The AIM Index, based on a survey of more than 140 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 constituent indicators that make up the Index were mostly lower during November. The confidence employers have in their own companies was virtually flat at 61.1, leaving it 9.3 points better than it was a year ago.

The Massachusetts Index assessing business conditions within the Commonwealth declined 0.7 points to 57.3, up 10 points since November 2020. The U.S. Index measuring conditions nationally shed 1.5 points in November to enter pessimistic territory at 48.8.

The Current Index, which assesses overall business conditions at the time of the survey, lost 0.5 points to 57.7. The Future Index, measuring projections for the economy six months from now, declined 0.4 points.

The Employment Index was the only indicator to rise during the month, gaining 0.3 points to 56.2 as signs of a thaw began to appear in the labor market.

Large companies (56.4) were more bullish than medium-sized companies (53.6) or small companies (51.1). Companies located north of Boston (61.9) remained significantly more confident than those in other regions of the Commonwealth.

Michael Goodman, professor of Public Policy at UMass Dartmouth and a member of the AIM Board of Economic Advisors (BEA), said the Massachusetts Legislature’s newly approved distribution of federal stimulus money under the American Rescue Plan Act, combined with the rollout of substantial federal infrastructure investments, will add momentum to a state economy that slowed to a 2% annual growth rate in the third quarter.

“In addition to boosting growth in the near term, these federal funds will allow Massachusetts to address long-standing and critical challenges including job training, transportation, housing, and education,” Goodman said. “Wise public investments in these and other areas will position the state for more sustainable and equitable growth over the long term.”

AIM President and CEO John Regan, also a BEA member, said employers will watch next year’s gubernatorial election carefully now that incumbent governor and business ally Charlie Baker has decided against running for a third term.

“Any change in the corner officer on Beacon Hill affects the confidence of Massachusetts employers,” Regan said. “Gov. Baker and Lt. Gov. Karyn Polito will leave a legacy of disciplined fiscal management and policies that have allowed Massachusetts to remain a pre-eminent center of technology and commerce. From massive regulatory reform to leading the Commonwealth through the COVID-19 pandemic, Gov. Baker has employed what he calls his ‘get stuff done’ approach to create economic opportunity and prosperity for the citizens of Massachusetts.”