Business confidence low - high inflation and interest rates, and is expected to get worse

Business confidence among the state’s employers fell last month to the lowest level seen since the height of the pandemic, according to a recent survey of Massachusetts employers.

The , in its monthly Business Confidence Index, says Massachusetts business owners’ faith in the economy plunged half-a-point in May, dropping from 50.1% to 49.6% and continuing a downward trend that first began in November.

And while a half point may not sound like a lot, the move is significant as a reading below 50 indicates a pessimistic outlook.

“Massachusetts employers turned pessimistic about the economy for the first time since December 2020 last month as the state economy slowed to a crawl and the Federal Reserve continued to raise interest rates,” the survey reads, in part.

The index, taken well ahead of Friday’s unexpected  from the Bureau of Labor Statistics showing the economy had added a further 339,000 jobs and before President Biden’s negotiated deal to suspend the debt ceiling until 2025 had cleared , reflects an ongoing concern among employers that the nation may be barreling toward economic recession or policy driven calamity.

“Businesses have been stung by both stubbornly high inflation and persistently high interest rates, which have dampened demand and raised costs. It’s unfortunately not surprising that the Future Index indicates that business leaders expect these conditions to worsen further,” Michael Tyler, Chief Investment Officer at Eastern Bank Wealth Management and Vice Chair of AIM’s Board of Economic Advisors said with the survey’s release.

“Thankfully, a possible recession would likely be shallow and short, cushioned by a strong jobs market and healthy consumer spending,” Tyler said.

Though circumstances may have seemed particularly dire to business owners as of last month, according AIM President John Regan, doing away with concerns of a U.S. default and the consequences of what might follow will hopefully put the minds of employers at ease.

“The President and Congress did the right thing in hammering out an agreement that will maintain the stability of the global financial system. Employers need all the predictability they can get as the economy continues to slow down,” Regan said.