Business Confidence Declines, but Remains Positive, According to UA Center

TUSCALOOSA, Ala. — Confidence in the economy has somewhat declined among Alabama businesses, according to the third quarter “Alabama Business Confidence Index” released by The University of Alabama’s Center for Business and Economic Research.

The report, released in June, indicates that Alabama business executives continue to see expansion in the Alabama economy, but they are somewhat pessimistic about the national economy.

Firms in construction, professional, scientific and technical services, as well as in finance, insurance and real estate are the most optimistic this quarter, all posting index levels of 54 or more. (Any rating above 50 indicates a positive outlook.)

Retailers, however, continue to have the most negative outlook. The pace of job growth and profits are expected to improve moderately or stay stable.

The four largest metro areas all posted positive readings except for Huntsville, which has a neutral index (50). Confidence decreased in all metro areas, with the smallest loss seen in Birmingham-Hoover. Montgomery continues enjoying the highest confidence among the large metros with an index of 53.9.

The survey, in its 15^th year, was conducted by the Center for Business and Economic Research at UA’s Culverhouse College of Commerce. It was completed online June 1-15 by 210 Alabama business executives whose uncertainty in the U.S. economy is likely the main reason for the decline.

However, they remain optimistic about Alabama’s economy. The rating takes into account four economic factors: sales, profits, hiring and expenditures.

The outlook for the state economy fell to a still quite confident 52.8, while the national economy index remained near the neutral mark with a slightly negative 49.0.

Almost 30 percent of panelists expect stronger economic growth in the state this quarter, and 52 percent expect the state’s economy to perform about the same as last quarter.

In comparison, about 25 percent expect increased U.S. economic growth, and almost 49 percent think growth will continue at about the same pace. The sales index remains on top of the list at 54.9 even after a 4.9 points drop, while expectations for capital expenditures increased slightly to 53.4.

Businesses of all sizes are less confident than last quarter, but they still remain positive about their third quarter prospects. Almost every indicator shows at least moderate optimism for each of the three groups categorized by number of employees.

Small firms, those with fewer than 20 employees, were the most confident, registering an index of 53.4. Medium-sized businesses, those with 20 to 99 employees, were also optimistic with a reading of 52.4. The reading for large firms declined the least to a positive 51.4.

Note that an index value above 50 indicates a positive outlook as compared to the previous quarter. All component indexes except for capital expenditures decreased this quarter, but most remain in solidly positive territory.

Results of the third quarter 2016 ABCI survey are available at http://cber.cba.ua.edu/abci/results.html.