A.I.M.'s Business Confidence Index Up Slightly in March.

Business Editors

BOSTON--(BUSINESS WIRE)--April 4, 2001

A.I.M.'s Business Confidence Index gained 1.4 points in March to 54.2, regaining a fraction of the 13 points lost over the previous three months. "The Index is off 11.5 points since March 2000, indicating drastically slowed growth," said Raymond G. Torto, co-chair of A.I.M.'s Board of Economic Advisors (BEA) and Principal, CB/Torto Wheaton. "The results of the March survey indicate that firm-specific circumstances, such as more favorable sales prospects for the last half of the year, not trends in the overall economy, account for the rise in confidence reflected in the Index."

Associated Industries of Massachusetts (A.I.M.) is the state's principal employer organization. The Business Confidence Index, approaching its tenth anniversary, is based on a monthly survey of A.I.M. member companies across the Commonwealth, asking questions about current and future business conditions in the state and the nation, as well as for the respondent's own operations. A reading above 50 on the 100-point scale indicates that the state's employer community is predominately optimistic. A number of component sub-indices are derived by analyzing responses to selected questions or those of particular groups of respondents.

Upswing Seen Over Next Two Quarters

"The Future Index for conditions six months ahead had its big drop in December, and has outperformed the Current Index since." Said Wayne M. Ayers, Chief Economist FleetBoston and BEA co-chair. It rose 1.9 in March to 55.8, down 10 from its level of a year ago, but nevertheless points to expectations of a mild upswing by the end of the third quarter. Meanwhile, Ayers said, "Twice as many firms (26%) expect to increase employment over the next six months as expect decreases."

Small Employers More Confident

"Over the past year, confidence has fallen twice as far in manufacturing (-13.5) as in other sectors (-7.8), said Frederick Breimyer, Chief Economist, State Street Bank& Trust Co. In Greater Boston, he said, "with its concentration of services-oriented members, confidence rose, while it fell in the rest of the state." Breimyer observed, "small employers were most positive about general economic conditions, while medium-sized firms were most confident about their own situations."

National Slowdown Affects Manufacturing

Commenting on the March survey results, Richard Lord, A.I.M.'s President and CEO said, "While the Business Confidence Index is not pointing to recession, the figures don't read as a mere blip in a continuing expansion. The first quarter 2001 Index average was below that for the last pause, the fourth quarter of 1998, when Asia's financial crisis hammered exports."

"While Massachusetts employers believe the economy is stronger here than elsewhere, the manufacturing sector, which is heavily oriented to national and international sales, is feeling the brunt of the slowdown," said Lord. Confidence among manufacturers is only slightly positive, and their assessment of current national conditions is firmly negative. As a result he said, "Members of the Legislature and the Administration should take great care to examine public policy issues that come before them to insure that efforts to improve our state's business climate do not erode and further discourage the manufacturing sector of our state's economy."