UA Report: State Business Confidence Continues Upward Trend

TUSCALOOSA, Ala. — Business confidence among Alabama’s industry leaders remains well above the five-year average for the third consecutive quarter, according to the latest report from economic analysts at The University of Alabama.

Business confidence registered at 61.6 in the third quarter 2017 Alabama Business Confidence Index survey conducted by the Center for Business and Economic Research at UA’s Culverhouse College of Commerce.

In the survey, the ABCI decreased 3.6 points from the previous quarter’s 10-year high to reach 61.6. The score marks the third consecutive quarter that the ABCI has registered levels above 60, while the average for the last five years is 54.3.

The current ABCI ranks almost 12 points greater than the 10-year average.

Susannah Robichaux, socioeconomic analyst for CBER, said cumulative confidence growth is actually higher than just the pure numbers would suggest.

“From Q1 2017 to the current quarter, the ABCI has been at levels not seen since 2006,” Robichaux said. “The ABCI in Q1 2017 was notable because at 62.7, it reached a 10-year high, but it is even more significant that it was followed by two more quarters of high expectations. Three consecutive quarters of business confidence growth suggests a very positive outlook on the business environment throughout the state.”

The ABCI is compiled from a quarterly survey sent to Alabama business leaders to gauge their expectations for the coming quarter compared with the current. The six component indexes that make up the ABCI reflect panelists’ expectations for industry sales, profits, hiring and capital expenditures, as well as their forecasts for the statewide and national economies.

An index value above 50 indicates a positive outlook, and the higher the index, the more confident the economic outlook.

In general, Alabama business leaders are continuing to forecast a strong Alabama economic outlook, with the index only losing 3.4 points to remain high at 64.2 this quarter.

Additionally, 59.6 percent of business leaders throughout the state expect even better statewide economic conditions compared to this year’s second quarter. The statewide outlook decreased slightly in the four metro areas, but it remained very confident with the lowest index value in Birmingham-Hoover (61.5) and the highest confidence in Montgomery (65.5).

Manufacturing continues to drive record state business confidence, registering the highest ABCI for the second straight quarter with an index of 68.1.

Panelists in manufacturing led in confidence with the highest values in all component indexes, indicating high expectations for continued industry growth moving into the third quarter. Conversely, business confidence in retail trade fell 9.5 points this quarter, making it the lowest industry ABCI at 46.5.

Panelists in retail trade expect a slowdown in hiring, profits and sales compared to the second quarter’s levels of growth.

Business leaders in Alabama’s four largest metro areas continue to respond optimistically, with all metros forecasting growth in the third quarter of 2017. ABCI Montgomery and ABCI Huntsville show the strongest confidence with overall index scores above 62.

All three Alabama firms – business categorized by number of employees – expect growth to continue with moderately strong confidence moving into the third quarter of 2017. All firms had ABCIs between 60 and 65 and optimistic forecasts for national and statewide economic growth.

For the second consecutive quarter, mid-sized firms, those with 20 to 99 employees, have the highest ABCI at 64.8, even after a 1.9-point decrease from the previous quarter’s index.