Business confidence rose to its highest level in two years last month as the US economy grew at a solid pace and inflation continued to moderate.

The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 2.3 points in October to 55.5. The reading was 4.3 points more than a year ago and the highest since November 2022.

The survey reflected a 2.8 percent annualized increase in US real GDP during the third quarter, even as inflation approached the Federal Reserve’s target level of 2 percent. Employment growth stalled in October, with employers throughout the nation adding just 12,000 jobs in the face of hurricanes and the since-settled strike by machinists at Boeing.

The October survey was taken before the results of the presidential election were known.

“Economic growth in the third quarter came close to the 3.0% annualized growth rate in the second quarter and was the latest indication that the surprisingly durable expansion remains on solid footing,” said Sara Johnson, Chair of the AIM Board of Economic Advisors (BEA), which oversees the BCI.

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.

Employers who participated in the survey say they continue to feel the pinch of rising costs.

“Energy, health insurance, and employee benefit costs have skyrocketed and are adding significant financial pressure,” wrote one employer in Central Massachusetts.

Confidence varied regionally across the Commonwealth. The Central Massachusetts Business Confidence Index, conducted with the Worcester Regional Chamber of Commerce, slipped from 49.8 to 48.4; the Western Massachusetts Business Confidence Index, developed in collaboration with the Springfield Regional Chamber of Commerce, retreated to 51.9; and the North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, surged to 61.6.

Constituent Indicators 

The constituent indicators that make up the Index were mostly higher in October.

The confidence employers have in their own companies was up 2.1 points to 56.3. That figure was 4.4 points better than in October 2023.

The Massachusetts Index assessing business conditions within the Commonwealth rose 2.9 points to 54.2, leaving it six-tenths of a point higher than a year earlier. The US Index measuring conditions throughout the country gained 2.4 points to end the month at 54.4, its highest point in more than three years.

The Current Index, which assesses overall business conditions at the time of the survey, gained 2.3 points to 55.0. The Future Index predicting conditions six months from now moved up 2.3 points to 56.0.

The Manufacturing Index, which has lagged overall confidence readings for much of the year, was unchanged at 50.5. The Employment Index was the only indicator losing ground, falling 0.6 point to 52.5.

Medium-sized companies (58.1) were more optimistic than large companies (53.9) or small companies (53.1).

Marcelo Suárez-Orozco, Chancellor of the University of Massachusetts, Boston, and a BEA member, noted that job growth remains steady in Massachusetts.

“The state gained 34,100 jobs from September 2023 to September 2024 and the labor-force participation rate stands at its highest level since 2020. Those numbers continue to highlight the importance of education and training in fueling the expansion of the Massachusetts economy,” Suárez-Orozco, said.

Economic Development Bill

AIM President and CEO Brooke Thomson, also a BEA member, said Massachusetts businesses are grateful that the Legislature has reached agreement on a multi-billion-dollar economic-development bill by the Massachusetts Legislature that would make significant investments in both developing and traditional industries.

“This measure is absolutely essential for economic growth and development, to support critical economic sectors, and to protect our economy and businesses in the face of increasing competition from other states,” Thomson said.