Business confidence rose last month as the Federal Reserve lowered interest rates amid generally stable economic activity.

The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 2.2 points in September to 53.2. The reading was 3.4 points more than a year ago and comfortably above the 50 mark that separates negative and positive outlooks.

The survey was taken before longshoremen on the East and Gulf Coasts went on strike, a move that cut off most trade through Boston and other busy U.S. ports and could send a chill through the economy. The survey also preceded the recent escalation of conflict between Israel and Hezbollah.

The survey did cover a period in which the state labor market continued to downshift – the Massachusetts unemployment rate rose to 3.7 percent in August, four-tenths of a point higher than a year earlier. Inflation nationally moderated, with the personal consumption expenditure (PCE) inflation rate settling at 2.68 percent.

“Business confidence continues to vacillate in response to a shifting economy, but the prospect of lower interest rates is good news for Massachusetts businesses and households. It remains to be seen how significantly the port strike will weigh down the economy in coming months,” 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 agreed that the impending presidential election adds a dose of uncertainty to the economy.

“The outcome of November 2024 elections will determine a lot of outcomes – positive or negative,” wrote one service company north of Boston. On another topic, a construction company observed: “Finding qualified help or those interested in the trades has been challenging for the past decade and I don’t see it getting better.”

Confidence varied regionally across the Commonwealth. The Central Massachusetts Business Confidence Index, conducted with the Worcester Regional Chamber of Commerce, surged from 44.6 to 49.8; the Western Massachusetts Business Confidence Index, developed in collaboration with the Springfield Regional Chamber of Commerce, rose to 60.2; and the North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, fell from 54.1 to 51.0.

Constituent Indicators 

The constituent indicators that make up the Index were uniformly higher in September.

The confidence employers have in their own companies was up 1.5 points to 54.2. That figure was 2.5 points better than in September 2023.

The Massachusetts Index assessing business conditions within the Commonwealth rose 1.4 points to 51.3, leaving it nine-tenths of a point higher than a year earlier. The US Index measuring conditions throughout the country gained 5.0 points to move into optimistic territory for the first time since February.

The Current Index, which assesses overall business conditions at the time of the survey, gained 1.4 points to 52.7. The Future Index predicting conditions six months moved up 3.1 points to 53.7.

The Manufacturing Index, which has lagged overall confidence readings for much of the year, gained 2.3 points to hit its highest mark in six months at 50.5. The Employment Index added 1.2 points to 53.1.

Medium-sized companies (57.1) were more optimistic than large companies (54.0) or small companies (48.2).

Michael A. Tyler, Vice Chair of the BEA, said economic and financial measures are well within historical norms, indicating that the long-predicted recession appears unlikely to happen in the short term.

“The long-term outlook remains bright, supported by resilient consumers, stable jobs, and double-digit earnings growth. It’s important to remember, however, that global events such as war, climate catastrophe and elections can change the picture quickly and significantly,” Tyler said.

Importance of MCAS Graduation Requirement

AIM President and CEO Brooke Thomson, also a BEA member, said the business community is concerned that a proposal on the November ballot to remove the Massachusetts Comprehensive Assessment System (MCAS) as a graduation requirement for high-school students would have long-term repercussions for the economy.

“We agree with Governor Maura Healey and other state leaders that MCAS must remain a requirement for students to obtain a meaningful high-school diploma that will open doors for them throughout their lives. As a national leader in K-12 education, Massachusetts must maintain high education standards, so our kids are prepared for college and career in a state economy that runs on knowledge, intelligence and innovation,” Thomson said.