As confidence in Alabama’s economy is being bolstered by increases in industry profits and sales, state business leaders do not have the same optimism for the future of the nation’s economic growth.
According to the latest Alabama Business Confidence Index, a quarterly survey conducted by the University of Alabama’s Center for Business and Economic Research, almost 58% of business leaders forecast worse economic conditions for the United States in the second quarter of 2022.
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“Inflation is a big part of the concerns for the U.S. economy,” said Susannah Robichaux, socioeconomic analyst for CBER. “Small and mid-sized firms had notably lower U.S. economic outlooks than large firms, which makes sense since these smaller businesses have tighter margins and would feel the impact of inflation sooner than their larger counterparts.”
Taken in early March, the latest Alabama Business Confidence Index was at 54.6, meaning state business leaders have mostly positive economic expectations for their businesses and the state economy in the upcoming quarter.
However, this survey continues a downward trend.
The Alabama Business Confidence Index dropped 2.6 points from the last survey, and is down from 67 in a survey taken in June 2021, just before a resurgence of the coronavirus through the delta variant.
An index over 50 indicates a positive forecast compared to the previous quarter, and the higher the number, the more confident the forecast, researchers said.
The Alabama Business Confidence Index is compiled from a broad group of business executives across the state focusing on six key indicators – statewide and national forecasts; industry-specific sales, profits, hiring and capital expenditures – and a composite index.
In addition to the statewide Alabama Business Confidence Index report, the Center for Business and Economic Research also collects data to write individual reports for Alabama’s five major metro areas. These metro reports offer insight into the forecasts for each specific region.
The breakdown of all the industry forecasts by sector can be seen in the statewide Alabama Business Confidence Index report on Center for Business and Economic Research’s website.
While the surveyed panelists have an overall positive outlook on the statewide economy, nationally, business leaders aren’t as optimistic, reflected in an index of 38.5 for the national economy.
In fact, state business leaders have not had a positive outlook for the U.S. economy since that survey snapshot before the delta variant emerged.
Six of the nine industry groups surveyed remain positive in their outlook for the second quarter, with healthcare and social assistance businesses reporting the lowest negative outlook.
Earlier this year, Ahmad Ijaz, executive director of the Center for Business and Economic Research, and other economists at the center had predicted Alabama’s economy would grow about 3% in 2022, but that has since been revised to an outlook of 2.7% growth.
Ijaz listed a number of factors for this revision, among them higher prices, falling exports, soaring inflation, rising interest rates, long-term interest rates that are currently lower than short-term rates, and the continued effects of Russia’s war in Ukraine.
“On one hand we have a relatively strong economy with very strong labor markets, both in terms of hiring and new job creation, labor force participation rate continues to tick upwards, corporate profits look great, and housing markets are doing well,” Ijaz said. “But there are also signs pointing to the fact that the economy may be headed for a recession.”
This article originally appeared on The Tuscaloosa News: Survey: Alabama business leaders sour on near-term U.S. economy