Briefing: Business Confidence
In April, the Associated Industries of Massachusetts Business Confidence Index reached its most optimistic level since August 2007, yet only 10 percent of respondents are confident the recession is over.
How does the index work?
It’s based on a monthly survey of AIM’s member companies, asking about current and prospective conditions for businesses in general and each member’s business in particular. The index has a 100-point scale, with anything over 50 considered optimistic, and below 50 pessimistic.
How has the index moved over time?
Since AIM created the index in 1991, the highest it’s been was 68.5 at two points in 1997 and 1998. Its lowest level was 33.3 percent in February 2009, and it’s been on the rise since then, hitting 56.1 in April. Its average level since it was created was about 55.
What can we tell about what employers are thinking?
According to AIM, employers are more positive about their own companies than about the state and national economy as a whole. The sub-index for individual companies stood at 61.3, while the Massachusetts index was 49.7, and the U.S. index was 45.9.
What about prospects for the future?
The future index was 58.2, significantly higher than the present index, at 53.9.
Do the good numbers mean the economy is getting back to normal?
Not necessarily. Asked whether the recession is over, only 10 percent said yes, while 30 percent said maybe, 48 percent said “not yet, though conditions seem to be improving” and 12 percent said no. In a statement on the index, AIM quoted a member of its Board of Economic Advisors, Carol C. McMullen of Eastern Bank, saying the numbers suggest that employers are adjusting their expectations to a “new reality.”
Does AIM have any advice?
In the statement, McMullen calls for employers to plan carefully and pay attention to details as they navigate an environment of slow growth. AIM also renewed its calls for reduced government spending and for a state approach that focuses on supporting all businesses rather than pushing certain industries.
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