Business Confidence Nears Pessimistic Territory in April

BOSTON — Massachusetts employer attitudes toward the economy shifted from optimistic to neutral during April amid concerns about the banking sector and continued interest-rate increases designed to slow inflation.

The Associated Industries of Massachusetts (AIM) Business Confidence Index lost 1.4 points to 50.1 last month, its lowest level since December 2020. Confidence was 8.0 points lower than a year ago and essentially even with the 50 mark that separates optimistic from pessimistic outlooks.

The Western Massachusetts Business Confidence Index, developed in collaboration with the Springfield Regional Chamber of Commerce, rose to 55.4.

Employers are seeing signs of slowing business activity after 10 consecutive interest-rate increases from the Federal Reserve. Another sign of that slowdown came last week when Massachusetts officials reported that corporate and business tax collections fell 3.0% in April from the same month in 2022. And tightening credit conditions pose downside risks to the region’s commercial real-estate market.

“Businesses report that some customers are postponing buying decisions as they evaluate whether the economy is headed for a soft landing or a recession. At the same time, however, the report that U.S. employers created 253,000 jobs in April shows that the employment market continues to defy the gravity of any slowdown,” said Sara Johnson, chair of the AIM Board of Economic Advisors (BEA).

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 in March. The confidence employers have in their own companies fell 2.4 points to 53.2, ending the month 6.8 points below April 2022.

The Massachusetts Index assessing business conditions within the Commonwealth lost 0.7 points to 48.6, down 8.7 from a year earlier. The U.S. Index measuring conditions throughout the country rose 1.4 points to 42.4 but remained in pessimistic territory for a seventh consecutive month.

The Current Index, which assesses overall business conditions at the time of the survey, fell 1.4 points to 51.5. The Future Index, measuring projections for the economy six months from now, lost 1.2 points to end the month at 48.8.

The Manufacturing Index edged down 0.2 points to 48.7. Confidence among non-manufacturing companies was down 2.2 points to 51.1.

The Employment Index fell 3.2 points to 51.6, potentially signaling some easing of a persistently tight labor market.

Large companies (51.9) were slightly more optimistic than small companies (50.8) or medium-sized companies (49.0).

Barry Bluestone, retired Professor of Public Policy and Urban Affairs at Northeastern University and a BEA member, said the mixed economic signals should not distract Massachusetts from addressing the important long-term workforce issues facing its economy.

“Massachusetts will ultimately succeed by ensuring that the workers who drive growth have the skills needed by the economy and have the opportunity to find housing that allows them to remain here in the commonwealth,” Bluestone said.

AIM President and CEO John Regan, a BEA member, said employers are also increasingly concerned about the standoff between the White House and Congress about raising the debt ceiling.

“Employers may disagree about federal spending, but no one disagrees that hitting the debt limit will cause significant economic damage,” Regan said. “The members of AIM join others in calling upon elected officials to set aside their disagreements and find a solution.”