Mass. Business Confidence Up Slightly

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By Rick Saia

Confidence among Bay State employers rose slightly in December as they watched the Washington saga over the "fiscal cliff" deal that was reached after the survey, conducted by a leading Massachusetts business interest group, was completed.

The Associated Industries of Massachusetts' (AIM) Business Confidence Index rose a point on a 100-point scale, from 46.8 to 47.8. A reading of less than 50 indicates more pessimism than optimism among the commonwealth's business leaders.

"The small uptick presumably reflects optimism in the course of the month that we would avoid the 'fiscal cliff,'" said Raymond G. Torto, global chief economist at CB Richard Ellis Group Inc. and chair of AIM's Board of Economic Advisors. "Nevertheless, the Index recouped very little of prior months' losses and is down 3.2 from its level in December 2011."

The index peaked at 57.1 in April of last year. Its last reading above 50 was in October (51.1).

Even with the agreement on taxes, which was reached Jan. 1, many employers still face significant uncertainty, Torto added. "Federal spending reductions, still ahead, are now likely to be larger than they might have been had the tax settlement produced more revenue," he said, "so affected sectors and businesses are waiting for the other shoe to drop.

"Also in question are the effects of these policies on the broader economy, along with persistent concerns, such as the European fiscal and monetary situation," he said.

Torto said survey results for January will "be interesting – will confidence be up because there was no cliff, or down because there was no solution?"

AIM's Future Index, which measures business expectations for the following six months, also rose slightly higher, 1.7 points, to 47.8.

Meanwhile, the group's Employment Index, which measures confidence in hiring, rose to 50.6 in December, a 1.5-point jump. "Employers tend to be relatively confident about the situations of their own operations, but this is less true in times of high uncertainty," said Alan Clayton-Matthews, professor at the School of Public Policy and Urban Affairs at Northeastern University, a BEA member. "Under the circumstances it's good to see the Employment Index up a bit and above 50, though the readings are barely positive."

Confidence among manufacturers took a relatively large jump of 3.5 points to 48. But among other sectors, confidence declined. "These two trends are probably related, as manufacturing forms a larger part of the economy outside the immediate Boston area," Clayton-Matthews noted. "Smaller companies, which in many cases pay personal rather than corporate income taxes, were much more negative than large ones on most questions."