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For immediate
release: October 30, 2008
AIM’s Business Confidence Index Hits All-Time Low

The Associated Industries of
Massachusetts Business Confidence Index fell to the lowest level in its
17-year history in October, losing 5.1 points to 41.4.
“This reading is even worse than the 41.5 we saw in December
1991, when we were in the depths of a severe recession,” said
Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc.
and Chair of AIM’s Board of Economic Advisors (BEA).
“The tenth of a point difference is statistically insignificant,
but this decline in confidence is driven by poor national conditions
– not a state-specific meltdown as in ’91 – and
respondents do not believe that we have bottomed out.”
The Index, based on a 100-point
scale on which 50 is neutral, was down 13.8 points from October
2007. All of the sub-indices based on selected questions or
respondent characteristics were likewise off on the year, and all but
one declined in October along with the main Index.
National Conditions Indicator
Plummets
The U.S. Index of national
conditions plunged 13.5 points in October to 28.6, the worst reading in
its history. “The previous low was 35 in July, and the bottom in
the last recession was 38.3 in October 2001,” said BEA member Sara
L. Johnson, Managing Director of Global Macroeconomics at IHS Global
Insight. The Massachusetts Index of conditions within the
Commonwealth was off 8.6 points to 34.3, also lower than any point in
the last recession but higher than its levels in 1991-92.
“Only 3% of survey respondents called national conditions
‘good,’ compared to 68% ‘bad’,” Johnson
noted, “and the Massachusetts results – 4%
‘good,’ 58% ‘bad’ – aren’t much
better.”
Employers’ assessments of
current conditions weakened in October, as the Current Index lost 2.7
points to 42.5, a level last seen in early 2003. The future
Index of prospects for six months ahead slumped 7.7 points to 40.5, the
all-time lowest reading. “Companies selling into the
national market have been experiencing the effects of recession for some
time, but now these effects are being felt here in Massachusetts, and in
international markets as well, contributing to a sense that conditions
will deteriorate further,” Johnson said.
Manufacturers, Other
Employers Lose Confidence
Confidence fell in October among
both manufacturers (-6.0 at 43.3) and other employers (-4.3 at
39.5). “Rising exports had helped manufacturers offset
weakening domestic demand, but now growth is slowing internationally,
and the dollar is regaining strength,” said Alan Clayton-Matthews
of the McCormack Graduate School of Policy Studies, University of
Massachusetts/Boston, a BEA member. Confidence levels were similar
among employers in Greater Boston (41.1, down 2.7) and those elsewhere
in the state (41.9, down 9.1).
The Company Index assessing the
situation of respondents’ own operations lost 3.2 point to 47.1,
slipping below 50. The Sales Index was off 3.5 to 44.6,
while the Employment Index was the sole gainer among the sub-indices,
edging up two-tenths to 46.6. “Each of these indicators is
at a level typical of past recessions,” said Clayton-Matthews,
“and there is little comfort to be found even in the employment
numbers, because survey respondents foresee a significant weakening of
the labor market in the coming six months.” Small employers,
he noted, were particularly pessimistic about future business
conditions.
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AIM Business Confidence Sub-Indices
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| Index |
Oct-08 |
Sep-08 |
Monthly Change |
Oct-07 |
Yearly
Change |
| Business Confidence |
41.4 |
46.5 |
-5.1 |
55.2 |
-13.8 |
| Company Index |
47.1 |
50.3 |
-3.2 |
57.7 |
-10.6 |
| Massachusetts Index |
34.3 |
42.9 |
-8.6 |
51.3 |
-17.0 |
| U. S. Index |
28.6 |
42.1 |
-13.5 |
51.0 |
-22.4 |
| Current Index |
42.5 |
45.2 |
-2.7 |
54.5 |
-12.0 |
| Future Index |
40.5 |
48.2 |
-7.7 |
55.6 |
-15.1 |
| Employment Index |
46.6 |
46.4 |
0.2 |
53.2 |
-6.6 |
| Manufacturing Index |
43.3 |
49.3 |
-6.0 |
54.7 |
-11.4 |
| Monthly and yearly changes are calculated using
unrounded indices. |
Recession Should Focus
Attention on Business Climate
“The national recession is
clearly catching up with Massachusetts, and everyone who remembers the
last recession, earlier in this decade, knows that going in late does
not mean we won’t experience a severe and prolonged
downturn,” said Richard C. Lord, President and CEO of AIM and a
BEA member. “While there are some reasons to believe
that we are better positioned to weather the storm this time, our
state’s high cost structure and difficult business climate become
increasingly disadvantageous in a bad economy,” he
added.
“Public officials will
have their hands full managing government operations in a time of
declining revenues, and we support their efforts to achieve greater
efficiencies,” said Lord. “At the same time,
however, we all know that the private economy provides the resources
that sustain the public sector, which means that a favorable business
climate must be the first priority for survival and eventual
recovery.”
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
FOR MORE INFORMATION
CONTACT:
Brian R. Gilmore, Executive Vice President - Public Affairs
Phone: (617) 262-1180
E-mail: bgilmore@aimnet.org
Website: www.aimnet.org
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