BOSTON — The Associated Industries of Massachusetts (AIM) Business Confidence Index recorded the largest monthly drop in its history during March as the COVID-19 pandemic unraveled the global economy.
Confidence dropped 21.9 points to 40.2 on a 100-point scale, moving the reading into pessimistic territory (below 50.0) for the first time since October 2013. The largest monthly decline in confidence prior to last month took place in October 1998, when the Index dropped 9.6 points.
Business confidence in Massachusetts now stands 19.1 points below its level of March 2019 and just seven points higher than its nadir during the recession of 2009.
The confidence decline reflects the continued idling of vast swaths of the global economy as health officials work to stem to spread of the novel coronavirus. Members of the AIM Board of Economic Advisors (BEA) say the March results are not surprising at a time when experts believe the U.S. economy will contract by more than 5% in 2020.
“The unprecedented one-month erosion of business confidence represents the unique set of circumstances that have changed almost every aspect of life during the past month,” said Raymond Torto, professor at the Harvard Graduate School of Design and BEA chair. “Massachusetts companies are trying to map out their futures in the face of government orders to cease operations and the uncertainty of forces beyond the scope of traditional economic models.”
The constituent indicators that make up the Business Confidence Index were all down. The Massachusetts Index assessing business conditions within the Commonwealth fell 29.5 points to 36.3, leaving it 25.4 points lower than in February 2019. The U.S. Index lost 20 points to 31.9.
The Future Index, measuring expectations for six months out, declined 18.1 points to 43.7, a year-over-year slide of 24.6 points. The Current Index, which assesses overall business conditions at the time of the survey, lost 25.8 points to 36.6.
The Employment Index was down 12.2 points in March and 10.5 points for the year. The Employment Index had lagged the overall business-confidence reading for several years amid a persistent shortage of workers.
“The Baker administration deserves tremendous credit for managing through a pandemic crisis with no easy answers,” said John Regan, CEO of AIM. “State government has made good-faith and transparent efforts to limit the spread of COVID-19, secure appropriate equipment for frontline medical workers, and, with the help of federal programs and resources, establish financial backstops for companies and workers alike. It will be a great day when we can all get back to business as usual.”