Outlook for National Economy and Capital Expenditures Drag Down the Alabama Business Confidence Index by David Zaslawsky
The Alabama Business Confidence Index is entering its 12th year of taking the pulse of the state’s business executives. During the 45-quarter history of the index there have been a few wild gyrations with the index falling a whopping 12 points one quarter and gaining 14 points in another quarter. There have also been moves of 10 points over consecutive quarters and now the index has declined 11.4 points over a three-quarter span from a 56.8 index in the second quarter of 2012 to an index of 45.4 points in the first quarter of 2013. The most recent index is being dragged down by the outlook for the national economy and capital expenditures. The Montgomery respondents in the quarterly survey conducted by the University of Alabama Center for Business and Economic Research had been the most optimistic of the state’s four metro centers – Montgomery, Birmingham, Huntsville and Mobile – for six straight quarters. The Montgomery respondents were among the most pessimistic in the 2013 first quarter with an index of 44.3, about four points more than Huntsville, but six points less than Birmingham. The Montgomery respondents are forecasting contraction in each of the six components in the index.
ABCI quarterly breakdown 2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Q1
54
58
67
62
59
54
47
32
49
55
51
45
Q2
63
56
67
61
61
56
43
32
50
56
57
Q3
60
61
69
60
59
57
43
46
52
51
50
Q4
56
61
66
54
54
51
44
47
48
46
48
Source: University of Alabama’s Center for Business and Economic Research
The following is a breakdown for Alabama of each of the six components: National economy The component tumbled 4.2 points from the 2012 fourth quarter and is now less than 40 (38.4). The component has declined about 16 points in the past three quarters. Almost 40 percent of the respondents are expecting the first quarter to be worse than the fourth quarter and another 15 percent expect it to be much worse. Only 20 percent are forecasting an improved quarter. Alabama economy The component declined 3.0 points to 46.7, which shows contraction. About 40 percent are expecting the quarter to be worse than the fourth quarter vs. 28 percent who are forecasting a better quarter and another one-third who expect the quarter to remain the same. Industry sales This component declined the least amount – 0.7 points – to slip to 50.4 and is the only component with an index more than 50 (50.4). An index of 50 or more indicates growth. About one-third expect an increase in first-quarter sales and 30 percent expect a decrease. Another 30 percent expect the quarter to remain the same as the fourth quarter. The most upbeat
sectors are finance, insurance, real estate, construction, transportation, information and utilities. Retail sales are expected to be flat. Industry profits The same number of respondents anticipate profits to remain the same as the fourth quarter; to be worse; or improved. The component declined 0.9 points from the fourth quarter and slipped to 47.7 points. The health care sector is the most pessimistic while the finance sector is looking for an increase in profits. The wholesale trade sector is forecasting a moderate increase. Industry hiring The component fell 3.0 points to 45.7. Nearly half of the respondents expect no change from the previous quarter, but one-third are forecasting a decline compared with about 20 percent expecting an increase in hiring. The most optimistic sector is construction and the most pessimistic sector is retail. Capital expenditures – This component’s decline was a dramatic 5.3 points and the index fell to 43.6. About 35 percent are expecting a decline in spending and just 20 percent are expecting to increase spending. Nearly 45 percent expect no change in capital expenditures from the fourth quarter. Spending is expected to decline in all sectors except for transportation, information and utilities, which are forecasting expenditures to be flat. •
March 2013 Montgomery Business Journal
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