A strong performance by the Massachusetts economy during the fourth quarter of 2022 was not enough to stem a two-month decline in business confidence among employers still concerned about a slowdown in 2023.

The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 0.8 points to 53.2 during January. The Index began the new year 2.7 points lower than its level of January 2022 but still at a level that signals overall optimism.

Employers remain wary even though the Massachusetts economy grew at a 3.1 percent annual rate and the US economy at a 2.9 percent annual rate during the fourth quarter. Companies are concerned that efforts by central banks to moderate inflation by raising interest rates will push the economy into recession.

At the same time, labor remains in tight supply despite high-profile layoffs at technology companies. Job vacancies remain at historic highs, with two openings for every unemployed person.

“The good news is that 12-month consumer price inflation moderated to 6.5 percent in December from a high of 9.1 percent in June 2022. However, measures of core inflation (excluding food and energy) remain well above rates that are consistent with the Federal Reserve’s 2% inflation target. While the Fed slowed the pace of interest rate increases to just a quarter point last week, it signaled that further rate hikes are coming,” said Sara L. Johnson, Chair of the AIM Board of Economic Advisors.

Participants in the Business Confidence Index Survey reflected the often-contradictory signals being given off by the economy.

“We have seen a definite slowdown in the large logistics buildings being planned and proceeding to construction. On the other hand we are seeing fairly robust activity in the planning and construction of flex industrial space….We have seen multiple projected expedited to construction in order to fix interest rates before the next increase,” wrote one employer in the construction industry.

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.

The Central Massachusetts Business Confidence Index, conducted with the Worcester Regional Chamber of Commerce, fell slightly from 52.8 in December to 52.5 last month. The North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, declined from 56.7 to 55.6.

Constituent Indicators 

The constituent indicators that make up the Index were mostly lower during January.