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State Business Confidence Off in June, Well Up on Year

BOSTON — The Associated Industries of Massachusetts (AIM) Business Confidence Index recorded a reading of 53.7 in June, making for a second-quarter average of 53.8.

“The positive quarterly average reflects the diminution in recent months of major economic-policy conflict in Washington, which has contributed to stronger business confidence,” said Raymond Torto, global chairman of research at CBRE and chair of the AIM Board of Economic Advisors (BEA). “With less ambient uncertainty, employers are becoming more positive about adding personnel, a sign of confidence that is reflected in our survey. The other notable improvement is in responses from small employers, those with 25 or fewer employees, who are now about as optimistic as mid-size firms.”

The AIM Index 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. In June 2013 it stood at 48.9.

Nearly all of the sub-indices based on selected questions or categories of respondent were down from May, but all were up from last June. The Massachusetts Index, assessing business conditions within the Commonwealth, was up 3.3 points on the year to 50.9, and the U.S. Index of national business conditions was 7.6 points ahead of last June at 48.2. “Massachusetts has generally outperformed the nation economically since the onset of the recession,” said Alan Clayton-Matthews, professor at the School of Public Policy and Urban Affairs at Northeastern University, and a BEA member. “Our state is well-positioned to continue to thrive, but is inevitably standing out less as the rest of the country returns to normal performance.”

The Current Index, which assesses overall business conditions at the time of the survey, was 4.1 points above last June’s level at 52.8, and the Future Index, measuring expectations for six months out, was up 6.7 points from a year before at 54.6. “The consensus of economic forecasts calls for faster growth through the rest of this year and into 2015, and most respondents to our survey agree,” Clayton-Matthews noted. “Small and large employers are more optimistic about the near future than mid-size companies; manufacturers rate current conditions lower than other employers, but have similar expectations for the second half of the year.”

The Company Index, reflecting survey respondents’ assessments of conditions for their own operations, was up 5.3 points on the year to 56.5. The Employment Index was up the same amount at 54.6, and the Sales Index gained even more, 7.6 points to 57.6. All three were off fractionally from May. “The employment results, even with a marginal loss for the month, continue to reflect a moderate upward trend,” said BEA member Elliot Winer, chief economist for Northeast Economic Analysis Group LLC. “Among employers responding to the survey, 41% expected to add personnel in the next six months, while only 10% foresaw staff reductions, a marked improvement from the already positive 38%-23% split for the prior six months.”

Confidence fell in the manufacturing sector (down 2.9 to 51.5) but rose among other employers (up 2.8 to 56.8), and lower outside Greater Boston (52.8, down 1.5) than within the metropolitan area (54.1, down 0.2). Small employers (25 or fewer employees) were about as confident as mid-size firms (26 to 100 employees), while employers of more than 100 were more positive. “Responses on employment were, however, remarkably uniform,” Winer noted, “by region, for manufacturers and other employers, and for companies of all sizes.”

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