Business confidence fell slightly and remained in pessimistic territory during July as the US and Massachusetts economies gave off mixed signals.

The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 0.3 point last month to 48.6, marking the fifth consecutive month the gauge has been below the 50 level separating optimism from pessimism. The July BCI was 3.4 points less than the same month a year ago.

The slight drop in confidence came as the government announced that the US economy grew at a 3 percent annual rate during the second quarter, surpassing forecasters’ expectations and rebounding from the first three months of the year, when output contracted at a 0.5 percent rate.

At the same time, analysts noted that volatile trade flows masked an overall slowing of economic activity. US employers added 73,000 jobs last month, lower than economists’ expectations.

Sara Johnson, Chair of the AIM Board of Economic Advisors (BEA), which oversees the BCI, said: “Growth in real final sales to private domestic purchases, a more reliable indicator of demand conditions, slowed to a 1.2% annual rate in the second quarter from 1.9% in the first quarter, with consumer spending and business fixed investment posting tepid growth.

“At its July meeting, the Federal Reserve held interest rates steady, apparently balancing downside risks to the economy against upside risks to price inflation.  With two board members now favoring lower interest rates, a continuation of subpar economic growth could bring a shift toward policy easing.”

Participant comments underscored the mixed nature of the economy.

“Manufacturers seem to be holding tight to their finances and are not investing in production upgrades or new equipment that would allow them improvements in their process…From where I sit in Western Massachusetts, this is not boding well for the economy,” wrote one company.

But another reported: “Orders steady. Can see demand building for increased revenue in Q4 and beyond.”

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 mixed in July.

The confidence employers maintain in their own operations decreased 0.8 point to 51.6. That figure was 1.3 points less than in July 2024.

The Massachusetts Index, assessing business conditions within the commonwealth, lost 0.7 point to 45.5, leaving it 6.1 points lower than a year earlier. The US Index measuring conditions throughout the country gained 1.4 points to 42.7, down 6.9 points from a year ago.

The Current Index, which assesses overall business conditions at the time of the survey, decreased 2.2 points to 47.7. The Future Index predicting conditions six months from now rose 1.6 points.

The Manufacturing Index continued its steady 2025 performance, gaining 0.1 point to 48.3 – 2.2 points higher than in July 2024. The Employment Index shed 0.5 point to end the month at 49.2.

Medium-sized companies (52.2) were more optimistic than small companies (47.7) or large companies (47.2).

Edward H. Pendergast, Managing Director, Dunn Rush & Co., said consumers continue to keep the economy on an even keel.

“Consumer spending increased at a 1.4 percent annual rate during the second quarter – an acceleration from the 0.5 percent rate in the beginning of the year, but well below the 2.8 percent growth in spending in 2024. Unemployment remains low and tariffs have so far done little to push up prices overall,” Pendergast said.

Research Investment

AIM President and CEO Brooke Thomson said the state’s newly proposed $400 million Discovery, Research and Innovation for a Vibrant Economy (DRIVE) initiative will be a boon to the Massachusetts research and innovation economy.

“The DRIVE Initiative represents the sort of creativity that Massachusetts needs to remain a global leader in research and innovation during a time of uncertainty. The proposal would use state funding to leverage private investment to create jobs and accelerate the research that provides billions of dollars in economic benefit to Massachusetts,” Thomson said.

“The 3,400 member companies of AIM are also pleased that the newly formed Advisory Commission on Advancing Research and Discovery in Massachusetts will review additional strategies to advance scientific discovery and job creation in Massachusetts.”