A.I.M.'s Business Confidence Index Gains Ground in February.

BOSTON -- The Associated Industries of Massachusetts (A.I.M.) Business Confidence Index gained 2.8 points in February to 57.5, ending a string of three consecutive declines. The rise returned the Index to the range where it spent most of 2005, although below its reading of last February (60.2).

"Respondents to the February survey rated business conditions within the state slightly better than neutral, after a dip in January, but significantly less favorable than those prevailing nationally," said Raymond G. Torto, Co Chair of A.I.M.'s Board of Economic Advisors (BEA) and Principal, CBRE Torto Wheaton. "Respondents no longer foresee an imminent erosion of business conditions, as they did at the close of 2005," he added.

State Indicator Positive, But Trails Nation's

"The sub-indices based on selected questions and respondent characteristics all rose from January to February, but the gains were uneven," said Sara L. Johnson, Managing Director of Global Macroeconomics, Global Insight. For example, she said, "The Current Index assessing economic conditions at the time of the survey gained 1.8 points in February to 55.1 (down 3.1 points for the year), and the Future Index for expected conditions six months ahead added 4.4 in February to 60.4 (off 1.8 from last February)."

The Massachusetts Index of conditions within the Commonwealth gained 2.4 points in February to 51.8, returning to the "positive" range of the 100-point scale, but lost ground to the U.S. Index of national conditions, which added 4.9 points to 56.0.

Confidence in Firm's Position Strengthens

Fred Breimyer, Regional Economist, FDIC, said "Positive expectations for the future centered on assessments of the situations of respondents' own firms. All three employer-specific sub-indices rose for a second straight month with the Sales Index up 4.4 to 63.9, Employment Index up eight-tenths to 54.6, and the Company Index up 2.1 to 59.8."

Breimyer added, "More employers reported adding workers than reducing them over the previous six months (29%-21%), and the numbers for expected hiring in the next six months were much more positive (32% - 8%)."

Confidence increased statewide, but less in Greater Boston than elsewhere. By size of employers, medium sized firms were generally most positive, with large employers more confident on most issues than smaller firms. Manufacturers confidence strengthened considerably in February (+4.6 to 58.4) while holding virtually steady among other employers (+0.1 to 55.5).

Despite Gain, Doubts Shadow Economy

Commenting on the results of the February survey, Richard Lord, A.I.M.'s President & CEO said, "Economic data released since the February survey was conducted indicated that the economic performance of the state and the nation is indeed improving as compared to a few months ago." However, he said, "It is notable that the rise in confidence recorded by the Index has more to do with prospects for the individual firms than with any sense of general improvement in economic conditions."

Continuing, Lord said, "Two particular areas in which a cautious interpretation of the upturn is warranted are the state's economy, and employment prospects. Although employers' assessment of conditions within the state brightened in February, the sub-index for the state remained well below that for the nation - after being ahead as recently as November. As to employment, the proportion of large employers reporting or anticipating workforce reduction has stayed stubbornly high even as expectations of new hiring have grown."

About the Index

The monthly Business Confidence Index, initiated by A.I.M.'s Board of Economic Advisors in July 1991, is based on a survey of A.I.M. member companies across the Commonwealth, asking questions about current and prospective business conditions in the state and nation, as well as for their respective organizations. Readings above 50 on the 100-point scale indicate that the state's employer community is generally optimistic, while a reading below 50 reflects a negative assessment of business conditions. A number of component sub-indices are derived by analyzing responses to selected questions or those of a particular group of respondents.

About A.I.M.

Established in 1915, Associated Industries of Massachusetts is a nonprofit, nonpartisan employer association of more than 7,600 Bay Sate businesses and institutions. A.I.M.'s mission is to promote the well-being of its members and their employees and the prosperity of the Commonwealth by working to improve the economic climate of Massachusetts, proactively advocate for fair and equitable public policy, and to provide relevant, reliable information and excellent services.

Media Contacts:
Raymond G. Torto, Ph.D., Torto Wheaton Research, [phone]

Donald J. Barry, Jr., Sr. Vice President, Citizens Bank,
[phone]

Richard C. Lord, President, Associated Industries of Massachusetts,
[phone]

Sara L. Johnson, Managing Director of Global Macroeconomics,
Global Insight, Inc. [phone]

Fred Breimyer, Regional Economist, FDIC, [phone]