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Business Confidence Hits 14-month High in February

Posted on March 1, 2024

Confidence among Massachusetts employers reached a 14-month high in February as inflation continued to moderate and the economy settled into a slow but predictable pace.

Every component of the Index strengthened during the month.

The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 1.0 point to 54.5 last month, the third consecutive month in which sentiment improved. The reading is comfortably within optimistic territory and a full point higher than it was in January 2023.

Labor markets remained strong, and inflation moderated to a 3.09 percent annual pace in January. At the same time, the Massachusetts economy slowed from a 4.9 percent annual growth rate in the third quarter of 2023 to 1.2 percent in the fourth as employment, wage and salary income, and goods spending were all weaker in the state than in the rest of the country.

“It may seem counterintuitive that employer confidence has strengthened as the economy has slowed, but companies believe that the Federal Reserve has brought inflation under control without sending the nation into recession. The outlook is for slow growth during 2024 but the economy is stable and that is big plus for employers,” said Sara Johnson, Chair of the AIM Board of Economic Advisors.

The AIM Index, based on a survey of more than 140 Massachusetts employers, 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.

Employers who took part in the February survey confirmed that their outlooks have improved in recent months.

“We are making big investments in capital in preparation for long-term growth,” wrote one company in northeastern Massachusetts.
Another observed: “More opportunities but more competition.”

The Central Massachusetts Business Confidence Index, conducted with the Worcester Regional Chamber of Commerce, rose from 49.1 to 52.4. The North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, fell from 57.3 to 50.0. The Western Massachusetts Business Confidence Index, developed in collaboration with the Springfield Regional Chamber of Commerce, rose from 50.4 to 55.4.

Constituent Indicators 

The constituent indicators that make up the Index all moved higher during February.

The confidence employers have in their own companies gained 1.4 points to 55.9, ending the month almost even with its level of a year ago.

The Massachusetts Index assessing business conditions within the Commonwealth was up 0.2 point to 54.2, leaving it 0.8 points higher than a year earlier. The US Index measuring conditions throughout the country ended the month at 50.6 – 3.5 points better than a year ago.

The Current Index, which assesses overall business conditions at the time of the survey, climbed 1.5 points to 54.0. The Future Index predicting conditions six months from now gained 0.4 point to 55.0.

The Manufacturing Index rebounded last month after falling in January, gaining 4.4 points to end February at 50.8. The Employment Index jumped 2.2 points to 53.8, leaving it 1.3 points less than in February 2023.

Large companies (58.5) were more optimistic than small companies (54.4) and medium-sized companies (52.1).

Suzanne Dwyer, President, Massachusetts Capital Resource Company and a BEA member, said her organization continues to see healthy demand for capital resources despite the persistent high interest rates of the past two years.

“We support companies in a broad base of industries including the manufacturing, distribution, consumer products, business services and technology sectors. Many of these companies are growing and looking to the future,” Dwyer said.

Economic Development Roadmap

AIM President Brooke Thomson, also a BEA member, said Governor Maura Healey’s new Economic Development plan, called the Mass Leads Act, will help to ensure that Massachusetts remains a global hub for life sciences, climate-tech and applied artificial intelligence (AI).

“The Healey Administration’s economic development plan is unique in its determination to grow the Massachusetts economy as a whole – We will not simply invent new medicines but will make them here; we will not just create new climate technologies but will deploy them here; we will not just push the boundaries of artificial intelligence but will determine the most innovative ways to use it,” Thomson said.