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Business Confidence Up, but Manufacturing Faces Headwinds

BOSTON — The Associated Industries of Massachusetts (AIM) Business Confidence Index rose 1.3 points in November to 56.9, almost exactly where it stood a year before (56.8).

“The story here is less the monthly gain than the longer-term pattern,” said Raymond Torto, Chair of AIM’s Board of Economic Advisors and lecturer at Harvard Graduate School of Design. “Over the past year, the index rose nicely for five months and then started a fitful decline back to where it was last November. The hidden trend behind that pattern is a divergence in confidence levels between manufacturers and other employers.”

He added that “our state’s manufacturing sector, which relies heavily upon international demand for its world-class products, is up against a strong dollar and weak conditions in all its major export markets — China, Japan, Canada, and Western Europe. Domestic demand is down as well because of global conditions and large inventories. In March, manufacturers were almost as confident as other employers, but the confidence gap has grown significantly since then.”

Torto noted that the manufacturing sector is overrepresented in AIM’s survey, but that it plays a vital part in the Massachusetts economy. “If the sector continues to struggle in 2016, other sectors will feel the repercussions, especially in regions of the state with concentrations of manufacturing industries.”

AIM’s Business Confidence Index has been issued monthly since July 1991 under the oversight of the Board of Economic Advisors. Presented on a 100-point scale on which 50 is neutral, the index attained a historical high of 68.5 in 1997 and 1998; its all-time low was 33.3 in February 2009.

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