Employer Confidence Falls Slightly in March

BOSTON — The Associated Industries of Massachusetts (AIM) Business Confidence Index (BCI) declined a point to 63.5 in March, retreating from a 17-year high in February. The BCI has gained 1.1 points during the past 12 months and remains comfortably within the optimistic range.

But virtually every element of the March confidence survey lost ground, led by a 1.7-point drop in the U.S. Index of national business conditions. Several employers blamed the Trump administration’s decision to level tariffs on steel, aluminum, and other products for their uncertain outlook.

“Tariffs on stainless steel and aluminum will negatively impact our bottom line in the short run and could prevent our customers from providing new projects due to increased costs,” wrote one employer.

Raymond Torto, chair of AIM’s Board of Economic Advisors (BEA) and lecturer at Harvard Graduate School of Design, said the steel and aluminum tariffs raise the prospect of retaliation by other nations against products made by Massachusetts companies. “Trade wars reduce the competitiveness of Massachusetts companies and increase costs for consumers. Announcement of the tariffs sent financial markets into a tailspin last month, and some of that uncertainty rubbed off on employers.”

Cranberries, for example, a key Massachusetts agricultural export, were among the products targeted for retaliation by the European Union before the administration exempted that region from the steel and aluminum tariffs. Massachusetts companies exported $27.5 billion worth of products to foreign markets during 2017, with the largest share (13.5%) going to Canada.

The AIM Index, based on a survey of 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 Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009. It has remained above 50 since October 2013.

AIM President and CEO Richard Lord, also a BEA member, said the announcement of tariffs and subsequent modifications of those tariffs by the Trump administration has generated uncertainty among employers. “Trade barriers are cause for concern in a state that exported more than $27 billion worth of goods in 2017. AIM and its member employers continue to believe that free trade and open markets remain the best way to ensure growth in the global economy.”