Mass. Businesses Turning Pessimistic

Last Time Index Entered Negative Territory Was in December 2020

Confidence levels among Massachusetts employers dipped back into pessimistic territory in May for the first time in more than two years.

Associated Industries of Massachusetts reported Monday that its business confidence index dropped to 49.6 in May, down from 50.1 in April, and now sits 5.1 points lower than a year ago. The index is based on a survey of more than 140 Massachusetts employers.

The last time the index was in negative territory was December 2020, when business confidence was rising coming out of the early months of the pandemic.

Massachusetts only squeaked out a smidgen of economic growth in the first quarter of 2023, slowing substantially from its late 2022 growth rate, and analysts at MassBenchmarks last month predicted GDP declines in the second and third quarters.

The trade group’s future index, estimating conditions six months from now, dropped a point in May to 47.8 and is down five points from this time last year.

“Businesses have been stung by both stubbornly high inflation and persistently high interest rates, which have dampened demand and raised costs,” Michael Tyler, chief investment officer at Eastern Bank Wealth Management, said in a statement accompanying the new index readings. “It’s unfortunately not surprising that the Future Index indicates that business leaders expect these conditions to worsen further. Thankfully, a possible recession would likely be shallow and short, cushioned by a strong jobs market and healthy consumer spending.”

The latest AIM survey was completed before a deal was struck to avert the negative global consequences of a U.S. debt default.