‘Cliff’ Fears Drag Down Mass. Business Confidence

SOURCE: Associated Industries of Massachusetts (AIM)

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By Rick Saia

Massachusetts employers’ fears over the approaching “fiscal cliff” pushed down business confidence to its lowest point in nearly three years, according to the Associated Industries of Massachusetts (AIM), a key association of Bay State businesses.

AIM’s monthly Business Confidence Index, which measures current and near-future business sentiment, registered a 46.8 on a 100-point scale in November, down from 50.9 in October, meaning there is more negative sentiment among employers. The only other month this year in which the reading fell below 50 was in June, when the index registered a 48.3.

"Respondents expect conditions to deteriorate over the coming six months, and employers are losing confidence in the situations of their own companies, which we generally interpret as a reaction to rising uncertainty," said Raymond G. Torto, global chief economist at CB Richard Ellis Group Inc. and chair of AIM’s board of economic advisers.
However, Torto added that since the survey responses were submitted shortly after last month’s elections, the results may not reflect more recent developments in Washington as both parties work to avoid the tax hikes and spending cuts that would take effect Jan. 1 unless the White House and Congress reach a compromise.

AIM’s Future Index, a component of the business confidence gauge, fell even deeper, by 4.4 points to 46.1, which suggests many employers "now expect some combination of spending cuts and tax increases to affect their businesses and the economy in the near future," said Michael Goodman, chair of the Department of Public Policy at the University of Massachusetts-Dartmouth. "Taken at face value … these numbers point to the possibility that inaction, or the wrong action, will bring the slow economic recovery to a standstill."