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Business confidence remains in pessimistic territory, but analysts said Tuesday that a major employer survey is beginning to show signs of a brightening view now that Massachusetts has begun to restart economic activity.
Government-forced business shutdowns sent business confidence readings plummeting into negative territory in March and the financial fallout of the coronavirus pandemic further dimmed the economic outlook in April. But the Associated Industries of Massachusetts Business Confidence Index ticked up slightly in May, rising 3.7 points to 42.1, which the employer group noted is "well below the 50-point mark denoting an optimistic outlook on the economy."
AIM said the increase in confidence came as Gov. Charlie Baker announced the state's four-phase reopening plan and began to loosen restrictions on business activity. The reboot of the economy was made possible by improving COVID-19 public health data, and the chair of AIM's Board of Economic Advisors said that good public health data is good for business.
"Employers are encouraged that Massachusetts has been able to moderate the number of new COVID-19 cases," Raymond Torto said. "We have said all along that the current economic crisis is being driven by the public-health crisis and that's what we see here."
The individual indicators that make up the Business Confidence Index were "uniformly higher" in May, AIM said. The Massachusetts Index, which assesses business conditions only within the state, increased 2.9 points to 37.4 in May — 23.5 points lower than in May 2019, but still a better reading than the U.S. Index, which measured at 36 last month.
Though employers were more confident in the state economy than the national economy, the index that measures conditions nationally gained 3.9 points in May, while the state index grew at a slower pace of 2.9 points.
The survey's Current Index, which assesses overall business conditions at the time of the survey, was up 4.9 points to 36.1 while the Future Index, which gauges expectations six months out, climbed 2.6 points to 48.2, AIM said.
"The fact that the Future Index is 12 points higher than the Current Index suggests that some employers believe they will be able to resume acceptable business volume as long as the virus remains under control," Elliot Winer, chief economist at Winer Economic Consulting and a BEA member, said, adding that any uptick in employer sentiment is important after the Massachusetts economy contracted at an estimated 6.1% annual rate during the first quarter.
AIM worked with the Baker administration's reopening advisory group, led by Lt. Gov. Karyn Polito and Economic Development Secretary Mike Kennealy, to devise strategies for a safe restart of the economy. AIM President and CEO John Regan said the phased reopening plan marked "an encouraging first step" but said businesses have a long road ahead as they adapt to new workplace safety requirements.
"We realize that every employer in Massachusetts would love to hear that they can reopen immediately," Regan said. "But we also acknowledge that a phased reopening balances the need to restart the economy with the need to manage a public health crisis that continues to claim many lives a day in Massachusetts."
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