A.I.M.'s November Business Confidence Index Steady at Low Level; Difficulty Obtaining Credit Not Widespread.

Business Editors

BOSTON--(BUSINESS WIRE)--Dec. 4, 2001

The Associated Industries of Massachusetts (A.I.M.) Business Confidence Index edged off a tenth of a point in November to 43.0 as Massachusetts employers continue to adjust to the reality of recession. Although November's decline was statistically insignificant, and the Index has lost only 1.1 points since September 11th, it is down 22.8 from November 2000, and has been below 50 on its 100-point scale - reflecting predominant pessimism in the state's employer community - in seven of the past eight months.

A special question on November's survey found some instances of companies' difficulty in finding business credit, but no signs of a widespread crisis such as developed the last recession a decade ago.

"The National Bureau of Economic Research says that the U.S. has been in recession since March, and A.I.M.'s Business Confidence Index dropped below 50 in April," said Raymond G. Torto, Co-chairman of A.I.M.'s Board of Economic Advisors (BEA) and Principal, CBRE Torto Wheaton Research, commenting on the survey results. "The overall Index and sub-indices have fallen to levels last seen in 1991, during the last recession," Torto added. "The exception is the index of conditions within Massachusetts, because this time around the state's economic climate has so far been no worse than the nation's."

Associated Industries of Massachusetts is the state's principal employer organization. The ten-year-old Business Confidence Index is based on a monthly survey of A.I.M. member companies from across the Commonwealth, asking questions about current and prospective business conditions in the state and nation, as well as for respondents' own operations. A number of component sub-indices are derived by analyzing responses to selected questions or those of particular groups of respondents.

State, National Conditions At Par

"With the overall Confidence Index virtually unchanged, the various sub-indices were mixed in November," said Wayne Ayers, Chief Economist for FleetBoston Financial and BEA Co-Chair. "The U.S. Index of national conditions gained 2.4 points to 40.7, while the Massachusetts Index of conditions within the Commonwealth lost two-tenths to 40.8," Ayers noted, adding that "the state indicator has been above its national counterpart continuously since May 2000, but that gap has almost closed as the slowdown has taken hold in our local economy." Only 6% of survey respondents rated current national business conditions "good" in November, compared to 45% "bad," Ayers said, and only 13% foresaw good conditions six months ahead.

Employers Brace For Longer Downturn

"The Current Index of conditions at the time of the survey gained 1.1 points to 40.0, while the Future Index of six-month prospects lost 1.6 to 45.8," said Frederick S. Breimyer, Chief Economist, State Street Bank & Trust Company, "which suggests that recovery from the immediate impact of Sept. 11th has been accompanied by a realization that the underlying recession is likely to last at least through the second quarter of 2002. "The Future Index has recorded declines in seven of the past eight months as survey respondents resigned themselves to a lengthier downturn," Breimyer noted.

Business Credit Availability a Positive Sign

"The last recession was much longer and more severe in Massachusetts than in the country at large," said Richard Lord, A.I.M.'s President and CEO. "One positive sign that we are keeping our economy in better sync with the nation's this time is the absence of a business credit crisis, such as developed with the near-collapse of our regional banking system a decade ago."

"There has certainly been some tightening of credit standards, leading to problems for individual companies, especially manufacturers, in a slow economy," Lord said. "But only 10% of executives responding to our survey were `definitely' concerned about business credit availability over the next year, while 69% reported no concerns," he added. "A more solid banking system and a broader economic base are among the reasons to expect that we can come through this recession in relatively good order."

Media Contacts:

Raymond G. Torto, Ph.D., CBRE TortoWheaton Research, [phone]

Wayne M. Ayers, Ph.D., FleetBostonFinancial, [phone]

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

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

Joseph D. Blair, Managing Director, Advest, Inc., [phone]

Sara L. Johnson, DRI-WEFA, [phone]

Frederick S. Breimyer, State Street Bank & Trust Company, [phone]