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For immediate release: June 2, 2009
Massachusetts Business Confidence Up in May

The Associated Industries of Massachusetts
Business Confidence Index recorded a solid 3.6-point gain in May to
39.0, its highest reading since November. “This is the third
consecutive monthly increase since February’s all-time low, each
larger than the one before,” said Raymond G. Torto, Global Chief
Economist at CB Richard Ellis Group, Inc. and Chair of AIM’s Board
of Economic Advisors (BEA). “Although the economy is still
deep in recession, the ‘positive hints’ we saw in March, and
the ‘bottoming out’ foreseen in April, have given way to
more substantially improved confidence in May.”
AIM’s Business Confidence Index, issued
monthly since July 1991, hit a record low at 33.3 on its 100-point scale
in February. Its all-time high was 68.5, last reached in May
1998. The May Index was down 10.4 points from May 2008, and 18.2
over two years. “Compared to April, however, we see
significant gains in every sub-index, along with the overall Business
Confidence Index,” Torto noted. “The key question for
future months will be whether this positive trend can be
sustained,” he concluded.

National, Future Indicators Lead
Gains
Among the sub-indices, the U.S. Index, assessing
business conditions prevailing nationally, led the way with a
seven-point gain 34.4, while the Massachusetts Index of conditions
within the Commonwealth added 3.1 to 33.1. “Massachusetts
went into recession later than the nation as a whole, but the recent New
England Economic Partnership forecast shows a slightly deeper trough and
a slower rebound here than nationally, because of our industry mix and
demography,” said Professor Alan Clayton-Matthews of the McCormack
Graduate School of Policy Studies, University of Massachusetts/Boston, a
BEA member. “This recession shapes up as worse for us than
2001-03, but not as bad as 1989-91 – and despite our delayed
recovery, this one (unlike the last two) will probably not hit us very
much harder than the rest of the country.”
The Current Index of conditions prevailing at
the time of the survey rose three points from April’s record low
to 33.1, off 16.5 from May 2008. The Future Index of expected
conditions six months ahead, meanwhile, gained 3.9 to 44.8, down 4.3 on
the full year; it was up 8.8 from its bottom in February. On a
special question, 20% of survey respondents expected economic growth the
resume nationally in the second half of 2009, and 40% in the first half
of 2010. “Again, these results are consistent with the
NEEP forecast, which points to significant improvement in the economy
from late 2009 and into 2010,” said
Clayton-Matthews.
Company Measures Improve; Manufacturing
Lags
“The May survey results on company issues
are all positive, though the numbers remain very low” said BEA
member Donald J. Barry Jr., Senior Vice President at Citizens Bank in
Boston. “The Company Index, which measures survey
respondents’ overall confidence in the situations of their own
operations, was up 2.5 points to 42.2 – not a strong number, but a
third straight increase after six consecutive monthly declines.
The Sales Index added 3.5 to 40.1, and the Employment Index gained
eight-tenths to 39.2. While very few firms are increasing their
workforces, and many are still cutting back, we are hearing anecdotally
about renewed ‘spot hiring’ to fill vacant and critically
needed positions.”
Confidence in May was much weaker in
manufacturing (35.1, +1.3), which is suffering badly in the worldwide
recession, than among employers in other sectors (43.8, +5.8).
Employers of all sizes were in general agreement on most questions, with
small firms significantly more negative than others about future
Massachusetts conditions. There was likewise little regional
variation, as confidence grew in Greater Boston (+1.6 to 37.5) and
elsewhere in the state (+4.0 to 38.8).
Stability, Recovery Are Twin Priorities
| AIM Business Confidence
Sub-Indices |
|
|
|
|
|
| Index |
May-09 |
Apr-09 |
Monthly Change |
May-08 |
Yearly Change |
| Business
Confidence |
39.00 |
35.4 |
3.6 |
49.4 |
-10.4 |
| Company
Index |
42.20 |
39.7 |
2.5 |
54.2 |
-12.0 |
| Massachusetts
Index |
33.10 |
30.0 |
3.1 |
43.9 |
-10.8 |
| U. S. Index |
34.40 |
27.4 |
7.0 |
39.7 |
-5.3 |
| Current
Index |
33.10 |
30.1 |
3.0 |
49.7 |
-16.6 |
| Future
Index |
44.80 |
40.9 |
3.9 |
49.1 |
-4.3 |
| Employment
Index |
39.20 |
38.4 |
0.8 |
52.1 |
-12.9 |
| Manufacturing
Index |
35.10 |
33.8 |
1.3 |
49.8 |
-14.7 |
| Monthly
and yearly changes are calculated using unrounded
indices. |
“The May Business Confidence Index
results show light at the end of the tunnel,” commented Richard C.
Lord, AIM’s president and CEO, a BEA member, “but we are
still in a dark part of the tunnel, and we must avoid pitfalls as we
work our way out.” The dangers ahead include continued
fiscal stress, lagging recovery, and the threat of out-migration of
educated, skilled workers if opportunities are lacking in
Massachusetts.
“Decisive action to stabilize public
finances, at both state and local levels, is essential to restoring
business confidence, and policies that lay the groundwork for renewed
business investment a job creation are equally important,” Lord
said. “Business conditions within the Commonwealth are seen
as less favorable than those prevailing nationally for the first time
since the start of 2008, and forecasts suggest that jobs will return
more slowly than economic activity – those are the circumstances
that could drive our most productive people, especially the younger
ones, to seek employment elsewhere, permanently damaging our
economy. Policy makers must consider both the immediate crisis and
our long-term prospects.”.
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
Massachusetts,
asking questions about current and prospective business conditions in
the state and nation, as well as for respondents' own operations. On the
Index's 100-point scale, a reading above 50 indicates that the state's
employer community is predominantly optimistic, while a reading below 50
points to a negative assessment of business
conditions. A number of component
sub-indices are derived by analyzing responses to selected questions or
those of particular groups of
respondents.
Media Contacts:
Raymond G. Torto, Ph.D., Torto, CB Richard Ellis Group, Inc., (617)
912-5225
Donald J. Barry, Jr., Sr. Vice President, Citizens Bank, (617)
725-5810
Fred Breimyer, Regional Economist, FDIC, (781) 794-5675
Sara L. Johnson, Managing Director of Global Macroeconomics, IHS Global
Insight, (781) 301-9115
Alan Clayton-Matthews, Ph.D., McCormack Graduate School of Policy
Studies, UMass/Boston, (617) 512-6224
Richard C. Lord, President, Associated Industries of Massachusetts,
(617) 262-1180
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