Daily News

Employer Confidence Retreats in August

BOSTON — Business confidence continued to seesaw during August as employers warily eyed a possible economic slowdown and the escalating trade war between the U.S. and China.

The Associated Industries of Massachusetts (AIM) Business Confidence Index fell 3.3 points to 58.7 last month after surging 4.4 points during July. The Index has lost 4.5 points since August 2018 but remains within optimistic territory.

The August decline was driven by growing concern about the U.S. economy and the outlook among manufacturers — both elements driven by trade concerns.

Analysts cautioned against reading too much into the month-to-month gyrations of the Business Confidence Index, but noted that every measure of confidence now sits below its level of a year ago.

“The imposition of 15% tariffs on $112 billion worth of Chinese goods on September 1 underscores the uncertainty facing employers, particularly manufacturers, who do business in overseas markets,” said Raymond Torto, chair of AIM’s Board of Economic Advisors (BEA) and lecturer at the Harvard Graduate School of Design. “At the same time, employers are beginning to see evidence from both customers and suppliers of a slowdown in the U.S. economy. That caution is reflected in the 7.4-point confidence drop in the national outlook.”

The nation’s gross domestic product — the broadest gauge of economic health — grew at a moderate 2.0% annual rate in the April-June quarter, down from a 3.1% growth rate in the first quarter.

The AIM Index, based on a survey of more than 100 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 all decreased during August. The Massachusetts Index assessing business conditions within the commonwealth fell 4.3 points to 63.9, while the U.S. Index dropped to 55.2. The Massachusetts reading has decreased 0.8 points and the U.S. reading 9.5 points during the past 12 months.

The Future Index, measuring expectations for six months out, declined 3.9 points to 56.9, leaving it 3.3 points lower than a year ago. The Current Index, which assesses overall business conditions at the time of the survey, lost 2.7 points to 60.5, 5.6 points lower than its reading from August 2018.

The Employment Index slipped 1.5 points for the month and 3.8 points for the year even as the state unemployment rate fell to 2.9%. Employers continue to struggle to find qualified workers in a full-employment state economy.

Non-manufacturers (60.3) were more confident than manufacturers (57.1). Small companies (61.5) remained more confident than large companies (58.7) or medium-sized companies (56.3). Companies in Eastern Mass. (60.7) continue to be more optimistic than those in Western Mass. (56.0).

Katherine Kiel, professor of Economics at the College of the Holy Cross and a BEA member, said business confidence reflects the same volatility that has shaken global financial markets in recent months. “Economic growth in Massachusetts slowed from 2.7% during the first quarter to 1.4% in the second. Employers remain optimistic overall, but see growing downside risks ranging from demographic constraints on the labor force to international uncertainty caused by factors such as tariffs and Brexit.”

Related Posts