Economic Outlook Improving Among State Business Leaders

TUSCALOOSA, Ala. – Alabama business leaders expect the economy to chug along this quarter at the same rate as the last quarter, but uncertainty about the national economy is keeping full-on optimism in check, according to the latest quarterly survey by The University of Alabama.

The UA Center for Business and Economic Research’s latest Alabama Business Confidence Index, taken in early June, was nearly neutral, indicating expectations for an overall continuation of last quarter’s economic performance.

For the first time since the second quarter of 2022, five of the six component indexes that go into the overall ABCI reflect business leaders are neutral or mildly positive. These offer insight into the near-term state economy and forecasts for panelists’ own business and industry. The only negative index is the U.S. economic outlook, a sour national expectation they’ve reported consistently for nearly two years.

“Over 50% of panelists are forecasting worse conditions in the national economy next quarter compared to the second quarter, and while we can’t say exactly why, ‘uncertainty’ is a useful umbrella to catch a lot of the concerns those business leaders could have,” said Susannah Robichaux, socioeconomic analyst for CBER.

The ABCI for the third quarter of 2023 is 49.7, rising for the second consecutive quarter after reaching a post-pandemic low for 45.7 in the first quarter of this year. An index over 50 indicates a positive forecast compared to the previous quarter, and the closer the number is to 100, the more confident the forecast.

ABCI is gathered from a broad group of business executives across the state with six key indicators and a composite index. The statewide and national forecasts, along with industry-specific components like sales, profits, hiring and capital expenditures comprise the six indexes that combine to make the ABCI total.

“Earlier in the year, most businesses were anticipating a recession, but now there is a good chance the Federal Reserve might be able to pull a soft landing of slower growth without becoming a full-blown recession,” said Ahmad Ijaz, CBER executive director and director of economic forecasting. “With the rate of inflation slowing down, we may be towards the end of Fed rate hikes, which lowers the cost of doing business for most firms. That makes these firms a bit more optimistic about the economy going forward.”

Business leaders throughout the state are most positive about the chance of increased sales this quarter, and they remain optimistic about hiring more workers this quarter, although they are not as confident in that forecast for increased hiring as they were the past two years, according to the latest survey.

This quarter, six of the nine industry groupings had an index above 50 showing a positive outlook for their own industry’s sales, profits, hiring and capital expenditures. Only two industries had a positive outlook in the first quarter of the year, and four last quarter.

Of the six metro areas in the state tracked in the survey, only Huntsville has a positive outlook for its economy, with an index 55.1. The Mobile area had the most negative outlook with an index of 43.

The breakdown of all the industry forecasts by sector can be seen in the statewide ABCI report on CBER’s website.