See-Sawing Business Confidence Again into Positive Territory

An up-and-down trend that began in March continued through July as confidence levels among Massachusetts business executives perked back up into positive territory, with analysts saying June’s shift into a pessimistic footing was likely “an aberration.”

On the zero-to-100 scale of Associated Industries of Massachusetts’ Business Confidence Index, the outlook among Massachusetts businesses climbed 2.2 points to settle at 52 for July, above the 50-point threshold that separates negative and positive territory but still half of a point below the readings from July 2023. AIM said the index survey was completed before the recent financial market selloff, but as more signs started to indicate that high interest rates are moderating inflation and also beginning to slow the national economy.

“The Fed kept interest rates at a two-decade high last week, while leaving the door open for rate cuts as soon as its next meeting in September,” Sara Johnson, who chairs AIM’s Board of Economic Advisors, said. “Its policy statement noted that the economic outlook is uncertain, presenting risks to both its employment and inflation goals.”

Johnson said consumers and employers are taking a similar “wait-and-see attitude” as the Federal Reserve seems poised to lower interest rates “before the economy sputters too much.”

Each indicator that makes up the confidence index gained ground in July, AIM said. The Current Index, which gauges overall business conditions at the time the survey was taken, surged 3.5 points to 51.7 last month.

The Massachusetts Index, which assesses business conditions only within the state, was up by 1.9 points to move into positive territory at 51.6 in July. That’s still 2.7 points below that subindex’s level of July 2023 though. Meanwhile, the US Index measuring conditions nationally, increased 2.9 points to 49.6, still just on the negative side of neutral.

The Future Index that measures how employers feel about the economy six months into the future was up 0.9 points to 52.3. And AIM said the comments it got from business leaders last month showed that the next six months are seen as crucial.

“The US Presidential election will impact the economy. The overall wrangling leading up to the election will impact the economy negatively,” one company said, according to AIM.

Another business executive told AIM: “The uncertainty of the November 2024 election and those results may throw a wrench into our business, depending on the outcome.”