Massachusetts business confidence rose for a fifth consecutive month during July as both the state and national economies continued to expand at a moderate pace.

The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 2.1 points to remain in optimistic territory at 52.7 on a 100-point scale. The increase left the Index 4.1 points better than its level of July 2025.

Strengthening confidence reflects in part the solid 2.0 percent annualized rate of economic growth that Massachusetts posted during the second quarter. Though employers remain concerned about elevated inflation, geopolitical uncertainty and the high cost of doing business in Massachusetts, they are also seeing a consistent level of deal flow.

“Unprecedented business activity,” wrote one manufacturer located south of Boston.

Sara Johnson, Chair of the AIM Board of Economic Advisors (BEA), which oversees the Business Confidence Index, said robust growth in business investment–particularly in artificial intelligence, advanced manufacturing, and technology – is combining with solid gains in consumer spending.

“Inflation has declined significantly from its post-pandemic peak but remains above the Federal Reserve’s 2% target. As a result, the Federal Reserve has kept interest rates relatively restrictive while signaling it is prepared to tighten further if inflation fails to continue moderating,” Johnson said.

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, 1997-98, and its all-time low of 33.3 in February 2009.

Constituent Indicators

The constituent indicators that make up the Index were mostly improved during July.

The confidence employers maintain in their own operations rose 0.4 point to 55.5. The figure was 3.9 points better than 12 months ago.

The Massachusetts Index, assessing business conditions within the commonwealth, gained 2.1 points, leaving it 3.3 points higher than in July 2025. The US Index measuring conditions throughout the country surged 6.9 points to end the month 5.3 points higher than a year ago.

The Current Index, which assesses overall business conditions at the time of the survey, rose increased 0.7 point to 52.5 while the Future Index predicting conditions for the next six months rose 3.3 points to 52.8.

The Employment Index was the only indicator to lose ground, dropping 1.1 points to 52.2 as companies in health care, technology and advanced manufacturing continued to struggle to find workers. MassBenchmarks reports that the Massachusetts labor force declined at a 3.2 percent annual rate between January and June, compared with a 1.6 percent decline for the U.S.

Meanwhile, the AIM Manufacturing Index gained 6.2 points to 52.6.

Medium-sized companies (53.6) were more confident than large companies (53.1) or small companies (49.8).

Alan Clayton-Matthews, Professor Emeritus of Economics and Public Policy at Northeastern University and a BEA member, said that the labor force in Massachusetts has continued to shrink, but productivity gains are keeping the commonwealth’s growth slightly ahead of the national rate.

“Relatively slow job growth reflects the demographics of an aging workforce, years of falling fertility rates, and immigration policies that sharply reduced net international migration,” Clayton-Matthews writes in MassBenchmarks.

Tariff Redux

AIM President and CEO Brooke Thomson, also a BEA member, said the new round of tariffs announced by President Donald Trump on July 24 do not bode well for business confidence for the remainder of 2026.

“The announcement of sweeping tariffs last April drove the AIM Business Confidence Index into pessimistic territory for 11 months until it recovered in June. Employers who participate in the survey tell us repeatedly that uncertainty surrounding the nation’s tariff policies has made long-term planning virtually impossible while taking some overseas markets off the table,” Thomson said.