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FOR IMMEDIATE RELEASE:                                     July 5, 2006

FOR MORE INFORMATION CONTACT:                  
Brian R. Gilmore
Executive Vice President - Public Affairs
Phone: (617) 262-1180
E-mail: bgilmore@aimnet.org

Media Advisory       

AIM’s June Business Confidence Index Dropped

Boston, Mass. – The Associated Industries of Massachusetts (AIM) Business Confidence Index lost 4.3 points in June to 53.2 -- 3.8 points below its level of a year before and its lowest reading since October 2003.

“The timing of the survey, which coincided with a period of bad economic news – interest rate hikes, drop in the Dow, inflation trends – may explain at least some of the decline in the Index,” said Raymond G. Torto, Co-Chair of AIM’s Board of Economic Advisors (BEA) and Principal, CBRE Torto Wheaton. In a longer-term perspective, Torto added, “June’s loss brought the Index’s average for the second quarter down only to 56.0, compared to 56.7 in both the prior quarter and the same quarter last year.” It also dropped the Index, completing its fifteenth year, below its historical average of 56.9.

National Business Conditions in Decline

The sub-indices based on selected questions and respondent characteristics all lost ground in June along with the main Index. The biggest loser was the U.S. Index of national conditions, which plummeted 9.5 points to 49.2 – below “neutral” on the 100-point-scale for the first time in almost three years.

   The Massachusetts Index of conditions within the Commonwealth was off 3.6 to an even 50. “Respondents rated the national conditions at the time of the survey better than those in the state, but foresaw significant deterioration over the next six months at the national level while state conditions remain stable,” said Donald J. Barry, Jr., SVP, Citizens Bank of Massachusetts. Barry added, “In June only 18% expected positive conditions ahead, compared to 41% in May; while the proportion expecting negative conditions rose from 10% to 29%.” Since June 2005, the U.S Index was off 7.3 points, with the Massachusetts Index down three points.  

The Current Index that measures conditions at the time of the survey lost 5.8 points in June, for a decline of two points on the year, while the Future Index for expected conditions six months ahead was down 4.5 to 53.2, for an annual loss of five points.

“The virtually identical readings of these two indices suggest that although they see current conditions weakening, and have moderated their expectations, survey respondents do not foresee an overall decline in business conditions in the near future, as they did in late 2005,” Barry added.

Employment Indicator Remains Positive

The three sub-indices assessing the positions of the respondents’ own firms were all lower in June, though in varying degrees. The broadest of them, the Company Index, was off 3.4 points to 55.7, while the Sales Index down 4.8 to 53.6, and the Employment Index down only a half-point to 53.4, six-tenths below June 2005.

“More employers expected additions to staff (22%) than reductions (7%) over the remainder of the year. Overall, companies were more positive about their own prospects than about business conditions generally,” said André Mayer, AIM’s Sr. Vice President of Research and Communications.

“Confidence fell in June among both manufacturers (-2.1 to 56.3) and other employers (-3.3 to 50.8) with larger employers markedly more positive than smaller ones on most survey questions, though not those about employment,” Mayer said.  

Quarterly Trend More Reliable than Monthly Result

Commenting on the June survey results, Richard Lord, AIM’s President & CEO said, “July’s results will provide evidence as to whether or not June was an aberration. Meanwhile, the quarterly averages, showing marginal weakening within a moderately positive range that has prevailed for more than a year, should be noted and appreciated by our lawmakers as they consider adding additional burdens on employers, both large and small.”

About the Index

The monthly Business Confidence Index, initiated by AIM's Board of Economic Advisors in July 1991, is based on a survey of AIM member companies across the Commonwealth, asking questions about current and prospective business conditions in the state and nation, as well as for their respective organizations. Readings above 50 on the 100-point scale indicate that the state's employer community is generally optimistic, while a reading below 50 reflects a negative assessment of business conditions. A number of component sub-indices are derived by analyzing responses to selected questions or those of a particular group of respondents.

About AIM

Established in 1915, Associated Industries of Massachusetts is a nonprofit, nonpartisan employer association of more than 7,600 Bay Sate businesses and institutions. AIM’s mission is to promote the well-being of its members and their employees and the prosperity of the Commonwealth by working to improve the economic climate of Massachusetts, proactively advocate for fair and equitable public policy, and to provide relevant, reliable information and excellent services.

Media Contacts:
Raymond G. Torto, Ph.D., Torto Wheaton Research, (617) 912-5225
Donald J. Barry, Jr., Sr. Vice President, Citizens Bank, (617) 725-5810
Richard C.  Lord, President, Associated Industries of Massachusetts, (617) 262-1180
Sara L. Johnson, Managing Director of Global Macroeconomics, Global Insight, Inc. (781) 301-9115
Fred Breimyer, Regional Economist, FDIC, (781) 794-5675