Massachusetts business confidence rebounded slightly in September, but employers remained pessimistic overall in the face of rising interest rates and persistent inflation.

The Associated Industries of Massachusetts Business Confidence Index (BCI) rose 1.2 points to 48.6 on a 100-point scale. Confidence ended the month 1.1 points better than in September 2025, but below the 50 mark that separates optimism and pessimism.

Employer attitudes continue to reflect a tug-of-war between an economy that is growing at a moderate pace and rising costs and other issues that are affecting profitability.

“The unusual feature of the current environment is that growth has held up better than many expected even as the Federal Reserve has been dealing with renewed inflation pressure,” said Sara Johnson, Chair of the AIM Board of Economic Advisors (BEA), which oversees the Business Confidence Index.

“The survey is providing a vivid picture of some companies doing very well and expanding while others are struggling with rising costs for energy and other critical inputs.”

Costs were very much on the minds of companies in September.

“Diesel over $6 a gallon is having a major impact on profitability, as well as our employee’s ability to fuel their vehicles and heat their homes,” wrote one employer from western Massachusetts.

An architecture firm wrote: “…We have seen hesitation to move forward with projects or cancellation of projects. We believe the uncertainty surrounding the economy and in particular escalating construction costs due to tariffs on building materials and equipment are the root cause for this dramatic shift over the last 3 months.”

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 during September.

The confidence employers maintain in their own operations rose 2.9 points to 53.3. The figure was 1.5 points higher than 12 months ago.

Confidence in the federal and state economies dropped. The Massachusetts Index, assessing business conditions within the commonwealth, lost 1.7 points to 44.7, still 2.0 points better than in September 2025. The US Index measuring conditions throughout the country slid 0.8 points to 38.6, ending the month 0.9 point lower than a year ago.

The Current Index, which assesses overall business conditions at the time of the survey, increased 2.7 points to 51.3 while the Future Index predicting conditions for the next six months fell slightly to 45.9.

The Employment Index gained 3.6 points to 52.5, almost even with the same month a year ago. The unemployment rate in Massachusetts dropped to 4.3 percent in August from 4.4 percent in July.

The AIM Manufacturing Index rose 1.7 points to 50.7.

Large companies (50.6) were more confident than small companies (47.2) or medium-sized companies (46.9).

Olena Staveley-O’Carroll, Associate Professor of Economics at the College of the Holy Cross and a member of the BEA, said the US employment market has moderated but remains on solid ground.

“Hiring is considerably slower than during the post-pandemic expansion. Businesses appear reluctant to make large layoffs, but they also aren’t adding workers at the elevated rates seen earlier in the recovery, while declining quit rates suggest workers are becoming more cautious,” Staveley-O’Carroll said.

Whither Inflation?

AIM President and CEO Brooke Thomson, also a BEA member, said Massachusetts and the nation have been growing based upon resilient consumer spending, technology infrastructure investment and a strong job market.

“For the short term, the primary challenge is how much the Federal Reserve will raise interest rates to counterbalance inflation that is running well above the Fed’s 2 percent benchmark,” Thomson said.