TUSCALOOSA, Ala. — The Alabama Business Confidence Index™ (ABCI) came in at an optimistic 54.8 on the third quarter 2015 survey. That’s 2.8 points lower than last quarter and less than a point below the ABCI of 55.5 recorded a year ago. Most component indexes decreased this quarter. Among statewide indicators, the largest losses in expectations were for hiring and sales. The state economy fared well in the survey, as confidence among Alabama business executives remained in solidly positive territory.
Panelists were tepid on the national economy, however, as the index lost almost six points to a near neutral reading of 50.7. About 29 percent of the state’s business executives expect the U.S. economy to expand at a faster pace than seen in the second quarter, while another 46 percent expect growth to continue at about the same pace.
Business executives expect Alabama’s economy to see further gains in the third quarter of 2015. At 56.6, the index is down two points from last quarter but has now enjoyed nine consecutive quarters of positive confidence. Over 39 percent of panelists anticipate growth at a higher rate than in the second quarter.
The sales index component of the ABCI lost 3.2 points to land at a still robust 58.3. Approximately 83 percent of panelists expect sales in their industry to increase or remain the same compared to second quarter levels, while just 17 percent forecast a decrease. Every industry except retail trade anticipates at least a moderate gain; sales growth should be strongest in professional services, wholesale trade, financial services, and construction.
Third quarter profits are likely to rise in all industries except retail trade. The profit index value of 55.7 is about one point below its second quarter reading. Approximately 80 percent of respondents expect profits to be the same or better than last quarter.
With construction, healthcare, and financial services posting the largest confidence gains for hiring, the state’s business executives are signaling further job gains this quarter, albeit at a slower pace. The hiring index fell 3.2 to 53.9. Nevertheless, 87 percent of the surveyed executives plan to maintain or increase the rate of job creation.
Capital spending is expected to grow statewide in the third quarter of 2015; the index fell by 2.2 to a confident 53.2. A quarter of panelists plan to increase investment, while over 57 percent anticipate spending to continue at about the same level as last quarter. All industries except construction and retail trade could see modest gains. The largest increases in spending are most likely be seen in healthcare and manufacturing.
Firms in professional services and financial services are the most optimistic this quarter, with ABCI readings of 58 or above. Professional services, wholesale trade, and financial services also have very strong outlooks for sales.
ABCI Montgomery edged down 2.7 points to 57.4, still coming in on top among the large metro areas. A weaker outlook for both sales and profits contributed to a small decline in Birmingham-Hoover’s ABCI to 53.1. All industry indicators declined in the Huntsville metro as the area’s index fell to 55.1 and in the Mobile metro as its ABCI declined to 54.3.
Businesses of all sizes are feeling positive about their third quarter prospects. 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 57.3. Medium-sized businesses, those with 20 to 99 employees, were also optimistic with a reading of 56.1. The reading for large firms held steady at 55.3.
REPORT: Results of the third quarter 2015 ABCI survey are available at http://cber.cba.ua.edu/abci/results.html. The survey, which is in its 14th year, was completed online June 1-15 by 174 Alabama business executives.
Gregg Bell, Ph.D., Research Associate, 205-348-3781, firstname.lastname@example.org
Viktoria Riiman, Research Associate, 205-348-3757, email@example.com
The Center for Business and Economic Research in the Culverhouse College of Commerce at The University of Alabama was created in 1930, and since that time has engaged in research programs to promote economic development in the state and provide economic and demographic forecasting, data, and analysis.
July 15, 2015