State business leaders not confident in economy: UA study

For the first time in eight years, Alabama business leaders have a negative outlook for the economy, 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, shows that despite moderate optimism for sales and hiring, business leaders have a gloomy forecast for the state and United States economies.

“This is likely due to the lasting effects of the pandemic on the local workforce, coupled with the prolonged difficulties with the global supply chain and international conflict that introduce a higher level of uncertainty to the economic environment,” said Susannah Robichaux, socioeconomic analyst for CBER.

The Alabama Business Confidence Index was 47.3, down more than seven points from the last quarter and continuing the downward trend. An index over 50 indicates a positive forecast compared to the previous quarter, and the higher the number, the more confident the forecast.

The index has dropped every quarter since it peaked at 67 in the third quarter survey taken in June 2021, just before a resurgence of the coronavirus through the Delta variant in fall 2021.

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.

Panelists are more sour on the U.S. economy, registering a 29.3 confidence index, than the Alabama economy, which they gave a moderately negative 41.1 index.

Earlier this year, CBER economists had predicted Alabama’s economy would grow about 3% in 2022, but have since revised that outlook to 2.2% growth.

The manufacturing sector was the lone sector of the nine industry groups surveyed with positive outlook for the third quarter, with healthcare and social assistance businesses reporting the lowest negative outlook despite that industry’s expectations for increased hiring.

Broken down by size, larger firms are slightly positive for their forecasts with growth expected across all industries. Smaller firms were milder in their confidence, but still anticipating growth. Mid-size firms, however, have quite a negative outlook compared to their counterparts, forecasting decreased profits and capital expenditures in addition to their strongly negative expectations for the Alabama and U.S. economies.

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

In addition to the statewide ABCI report, CBER also collects ABCI data to write individual reports for Alabama’s five major metro areas. These metro reports offer insight into the forecasts for each specific region.

Of the state’s five largest metro areas, only the Huntsville area had a positive index, mainly from confident forecasts for increased sales, hiring and capital expenditures in the third quarter. Tuscaloosa had the lowest index.