Daily News

Business Confidence Weakens in Massachusetts in September

BOSTON — Confidence among Massachusetts employers weakened slightly last month amid growing economic storm clouds both nationally and in Massachusetts.

The Associated Industries of Massachusetts (AIM) Business Confidence Index lost 1.4 points to 53.9, its lowest level since June. The Index now rests 5 points lower than its level of a year ago.

The decrease reflects the swirl of contradictory elements roiling the economy — surging inflation, rising interest rates, and shrinking economic output on the one hand and a persistently strong demand for workers on the other.

The September survey responses came as the Federal Reserve raised interest rates another three-quarters of a point on Sept. 21 and the financial markets closed out their worst month since March 2020.

“Companies remain concerned about inflation, the cost of borrowing, and the potential for a recession, but their primary concern remains finding the employees they need to enable growth and maintain operations. Many businesses have been able to increase product prices to compensate for rising costs and have thus sustained or increased their payrolls,” 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 during September. The confidence employers have in their own companies declined 3.6 points to 54.9, ending the month 5.8 points lower than in September 2021. The Massachusetts Index assessing business conditions within the Commonwealth dipped into pessimistic territory by losing 6.6 points to 47.5. The U.S. Index measuring conditions throughout the country surged 10.3 points to 57.1, leaving it 4.6 points better than in September 2021.

The Current Index, which assesses overall business conditions at the time of the survey, lost 1.4 points to 55.0. The Future Index, measuring projections for the economy six months from now, fell 1.5 points to 52.7.

The Manufacturing Index rose tumbled 7.4 points to 49.1, well below the 59.2 reading for non-manufacturing businesses. Medium-sized companies (58.0) were more optimistic than small companies (51.5) or large companies (52.0).

Katherine Kiel, professor of Economics at the College of the Holy Cross and a BEA member, said employer confidence is being shadowed by uncertainty during the second half of 2022.

“Business owners and CEOs find themselves amid a swirl of trends that include the post-COVID recovery, a tight job market, healthy consumer spending, rising prices, increased borrowing costs, and even the prospect of a pandemic resurgence during the winter,” Kiel said. “Lurking behind all of these issues, the Conference Board forecasts that economic weakness will intensify and spread more broadly throughout the U.S. economy in the second half of 2022 and expects a recession to begin before the end of the year.”

AIM President and CEO John Regan, also a BEA member, said Massachusetts employers remain hopeful that the Massachusetts Legislature will pass some version of an economic-development bill that was shelved on Aug. 1 as lawmakers attempted to digest the fiscal impacts a $3 billion tax rebate heading for taxpayers in November.

“The economic development bill includes key provisions for employers, including recapitalization of the Unemployment Insurance Trust Fund and reform to the estate tax,” Regan said. “AIM continues to work with the Legislature to find a way to enact this important piece of legislation.”