Business confidence increased to 65.2 in the second quarter 2017 Alabama Business Confidence Index TM (ABCI) survey conducted by the Center for Business and Economic Research at the University of Alabama’s Culverhouse College of Commerce. The ABCI is compiled from a quarterly survey sent to business leaders throughout the state gauging their expectations for the coming quarter compared with the current. The six component indexes that make up the ABCI reflect panelists’ expectations for industry sales, profits, hiring, and capital expenditures as well as their forecasts for the statewide and national economies. An index value above 50 indicates a positive outlook, and the higher the index, the more confident the economic outlook.
In the second quarter 2017 survey, the ABCI gained 2.5 points to reach 65.2 as business leaders throughout the state continue to forecast growth with confidence. For the second consecutive quarter, Alabama business leaders are anticipating increased sales, profits, hiring and capital spending with the highest levels of confidence in ten years. The average ABCI for the last five years is 53.8, which indicates expectations for growth but without the strong confidence we have seen in both quarters of 2017.
In general, Alabama business leaders have increased their expectations for the statewide economy this quarter, with the Alabama economy index gaining 1.9 points to reach 67.6 this quarter. This is the second consecutive quarter that the Alabama economy index has reached a ten-year high and the sixteenth consecutive quarter that Alabama business leaders have expected growth in the statewide economy. Just under 70 percent of panelists forecast growth in the Alabama economy in the coming quarter, and only 3.6 percent of Alabama business leaders anticipate a worse outlook for the state in the second quarter of 2017. The statewide economic index slightly decreased in Huntsville, Mobile and Montgomery but remained fairly confident at or above 65.0 in all of the metro areas.
The overall industry outlooks are positive in most categories with fairly high confidence in growth with 6 of the 9 industry ABCIs above 62. Wholesale trade and an umbrella category of services, which includes professionals in education, accommodation and arts and recreation, are the most optimistic about growth in the second quarter, with ABCIs above 70 and strong confidence in increasing sales. Panelists in healthcare and social assistance expect a continuation of last quarter’s growth, while business leaders in transportation, information and utilities are expecting a slight slowdown compared with their performance in the first quarter of 2017.
Business sentiment in Alabama’s four largest metro areas remains very optimistic, with all metros forecasting growth in the second quarter of 2017. ABCI Mobile and ABCI Birmingham-Hoover show the strongest confidence with overall index scores of 65.5, but even the lowest metro ABCI, which was recorded in Montgomery, reached 63.6 this quarter.
Alabama businesses continue to expect growth with fairly strong confidence moving into the second quarter of 2017 regardless of firm size. All three size categories had ABCIs between 63 and 67 and optimistic forecasts for the national and statewide economies compared with the first quarter of 2017. Mid-sized firms, those with 20 to 99 employees, had the highest ABCI at 66.7 after a 3.9-point gain from the previous quarter. These businesses had higher confidence in sales, profits and hiring with index readings of 69.8, 66.3 and 64.5, respectively. For large businesses, those with 100 or more employees, confidence decreased by 1.7 points to reach a still confident 66.2 this quarter. The ABCI registered 63.4 among small firms, those with fewer than 20 employees, after a 0.5-point decrease from the first quarter of 2017.
TBusiness executives in Alabama believe education and workforce training is the top issue currently facing the state. Education and workforce training ranked second in the 2015 survey and was one of the most significant shifts in rankings from the previous year.
Business executives are surveyed annually by the Center for Business and Economic Research in The University of Alabama’s Culverhouse College of Commerce on various topics related to issues facing the state and their respective companies. More than 104 business executives participated in the latest survey in November 2016. The survey has been conducted since 2013 and asks for opinions of the Alabama Business Confidence Index™ (ABCI) panelists.
While education and workforce training top the issues facing the state, economic and business development, dissatisfaction with government, infrastructure improvement and job growth rounded out the issues facing the Alabama.
In issues affecting companies directly, business executives ranked “economy in general” their top issue, which ranked fourth in the 2015 survey. Business leaders specifically mentioned the growth of the state and national economy, consumer confidence and a slow economic recovery.
Government regulations and taxes ranked closely to the economy in general in the individual company portion of the survey. Workforce and company finances and development were the third and fourth-ranked issues facing companies.
Each quarter, business executives across Alabama take the ABCI survey. Seventy-one percent of ABCI panelists use the results as a general indicator of local or regional economic outlook. Nearly 53 percent of business executives also compare personal projections to others’ viewpoints, and 43 percent use the ABCI results as a background information for estimating future trends. Additionally, almost 30 percent of business executives share results with others and 24 percent use the ABCI results in short-term planning.
The ABCI panel is open to business executives across the state. Registration and current and historical results are available on the ABCI website. Newsletters with results are provided for Alabama and for the Birmingham-Hoover, Huntsville, Mobile, and Montgomery metro areas. Panelists can take the Q2 2017 survey March 1-15.
Recent numbers indicate that Alabama job growth continues its slow but solid pace. The state added 24,500 jobs between October 2015 and October 2016.
Most of job gains were in services providing firms that added 20,700 workers. Employment levels within goods-producing firms also rose, by 3,800. Despite an improvement in both residential and commercial construction activity in the state, overall employment in construction-related firms fell by 2,200 over the twelve-month period ending in October 2016. Meanwhile, manufacturing industries in the state gained 6,500 net new jobs: durable goods manufacturers added 2,200 jobs while producers of nondurable goods added 4,300.
Among service-providing firms, job gains were predominantly associated with retail trade that added 9,400 workers, mainly in general merchandising stores. Government entities added 5,300 jobs, financial activities 5,200, professional, scientific and technical services added 4,200, and healthcare and social assistance sector added 2,600 jobs. Payrolls in the wholesale trade sector lost 2,400 workers while the accommodation and food services industry lost 1,200.
Economists from the Center for Business and Economic Research in UA’s Culverhouse College of Commerce have kept their annual employment forecast for 2016 unchanged. The state should create about 20,000 to 25,000 new jobs this year, a gain of around 1.0 percent that compares to 1.2 percent in 2015. Job growth is expected to be somewhat weaker in 2016.
Updated forecast for inflation-adjusted Alabama GDP predicts an increase of about 1.4 percent in 2016, up from 2.3 percent in 2015. The concentration of job gains in sectors of the economy that pay relatively low wages and/or hire temporary or part-time workers will likely contribute to subdued growth in business spending and relatively weak consumer demand.
Even with a weaker state economic growth expected in 2016, tax receipts should continue to rise. An increase of about 1.5 percent is forecasted for fiscal year 2017. Total tax revenues were up 1.2 percent in FY2016 ending in September, totaling about $9.9 billion. Appropriations to the Alabama Education Trust Fund were up by 0.4 percent, totaling $6.1 billion during that fiscal year. Annual total appropriations to the state’s General Fund were down 0.7 percent to approximately $1.8 billion in FY2016.
State exports rose by $778.1 million to $10.2 billion during the first six months of 2016 compared to the same period in 2015. Canada remained the state’s largest export market with exports totaling $4.1 billion in 2015. Transportation equipment manufacturing continues to be the state’s largest export sector. These exports rose to $5.4 billion during the first six months of 2016, up by $1.2 billion from the same period a year ago.
Alabama is expected to see stronger growth in both economic output (GDP) and employment during 2015, according to the forecast from UA’s Center for Business and Economic Research (CBER). Dr. Sam Addy, CBER Director and Associate Dean for Research and Outreach in the Culverhouse College of Commerce and Ahmad Ijaz, Associate Director and Director of Economic Forecasting, presented an encouraging outlook for the state in 2015 at CBER’s 27th annual Economic Outlook Conference. Around 150 attended the meeting, held January 15th in Montgomery.
After expanding by approximately 2.0 percent in 2014, Alabama’s economy could grow at a stronger 2.3 percent pace during 2015, with GDP reaching around $189.5 billion (inflation-adjusted 2009 dollars). Manufacturing will remain an important contributor to output gains. Manufacturers of motor vehicles and parts and other transportation equipment, as well as fabricated metals, computer and electronic products, and petroleum and coal products should post above-average increases in output. Professional and business services as well as educational services are also expected to make significant contributions to the rise in Alabama GDP.
Employment growth is forecasted to be around 1.8 percent, with about 33,800 jobs added across the state during 2015. That is a slight improvement compared to a gain of 1.7 percent in 2014 and builds on the 115,000 jobs created from January 2011 to November 2014. Expansions and new additions in the state’s motor vehicle and other transportation equipment manufacturing industries will help boost employment. Professional and business services, along with leisure and hospitality are among the other sectors where above-average employment growth is anticipated.
Total state tax revenues are expected to rise 2.4 percent in FY2015, greater than the 1.3 percent rate of increase seen in FY2014. With household income improving, individual income tax receipts should see the largest increase. Appropriations to the Alabama Education Trust Fund are forecasted to be 2.4 percent higher than in FY2014, while General Fund appropriations could increase 2.5 percent, a stronger outlook than gains of 2.1 and 1.0 percent, respectively, seen in FY2014.
Mr. Ijaz presented the 2015 Alabama outlook and Dr. Addy discussed the importance of education as the basis of building a better future for all Alabamians. Equating economic development to creating a higher or better quality of life, he noted that improved education is fundamental to human capital development—one of the three pillars of economic development, along with institutional and physical capital. Given labor force participation well below the U.S. average and an above-average median age, the state can leverage education to bring more residents into the workforce to address expected labor shortfalls.
Looking at prospects for the U.S. economy, Dr. David Altig, Executive Vice President and Director of Research at the Federal Reserve Bank of Atlanta, expressed optimism that the U.S. economy can continue to build on the strength seen in 2014. Growth is expected to average around 3.2 percent in the country in 2015, somewhat higher than global growth, which is expected to average around 3.0 percent for the year. Federal Reserve policy is expected to remain accommodative, with tentative slight increases in interest rates in the second half of 2015.
Mr. Ira Harvey, Executive Assistant to the Vice President for Financial Affairs at the UA, examined tax revenue issues in Alabama for 2015 and Mr. Jo Bonner, Vice Chancellor for Government Relations and Economic Development at the University of Alabama System, discussed Alabama economic development issues. The Constitution of 1901 places limits on taxation of wealth and income that continue to create revenue problems for state and local governments. While Alabama has the lowest property taxes per capita among other states, the state ranks near the middle as regards general sales taxes per capita. Further, Alabama ranks among the top five states in the nation for taxes on public utilities and alcoholic beverage. Meanwhile, public education in Alabama has been ruled a nonessential function of state government and can expect to suffer further shortfalls under proration.The 2015 Economic Outlook Conference was sponsored by the Alabama Department of Economic and Community Affairs, Alabama International Trade Center, Alabama Power, Alabama SBDC Network, BlueCross BlueShield of Alabama, Boeing, Hyundai Motor Manufacturing Alabama, Lockheed Martin Space Systems, PowerSouth Energy Cooperative, ServisFirst Bank, and Sterne Agee.
View presentations from the 2015 Economic Outlook Conference:
David Altig: A View from the Fed: The Answer is Yes and No
Ahmad Ijaz's: 2015 AlabamaEconomic Outlook
Dr. Ira W. Harvey: Tax Revenue Issues in Alabama for 2015
Recent numbers indicate that Alabama job growth may finally be picking up from the slow pace seen since the last recession. The state added 31,600 jobs between September 2013 and September 2014. That’s one of the highest rates of job growth during a 12-month period since the U.S. economy fell into recession in December 2007.
Job gains were spread across most sectors. Goods producing businesses added 11,000 workers, including 7,900 in manufacturing. Firms producing transportation equipment, particularly motor vehicle parts, and primary and fabricated metals saw the largest employment growth. With improvement in residential and commercial real estate markets, the construction sector is rebounding. The addition of 2,800 construction jobs in the past year includes 1,700 in building construction.
Payrolls in the state’s services sector grew by 20,600 between September 2013 and September 2014. Food service and drinking places added 10,000 workers, professional and business services gained 7,900, and educational services added 1,900. However, relatively sluggish consumer spending and demand conditions are hurting retailers, who shed 2,000 jobs over the past year. In the government sector, federal employers cut 1,000 jobs, while the state added 500 and local governments gained 1,600 jobs.
Economists from the Center for Business and Economic Research in UA’s Culverhouse College of Commerce have raised their annual employment forecast for 2014. The state should create about 25,000 to 30,000 new jobs this year, a gain of around 1.1 percent that compares to just 0.5 percent in 2013. Job growth is expected to be somewhat stronger in 2015.
Inflation-adjusted Alabama GDP is expected to increase by about 1.5 percent in 2014, followed by stronger growth of around 2.3 percent for 2015. However, the concentration of job gains in sectors of the economy that pay relatively low wages and/or hire temporary or part-time workers will likely contribute to subdued growth in income tax collections and relatively weak consumer demand.
Alabama business executives remain optimistic about their prospects for the fourth quarter of 2014. CBER’s Alabama Business Confidence Index™ (ABCI) slipped 1.3 points to 54.2, indicating growth at a slightly slower pace than in the third quarter. The state’s business community is, however, more optimistic than a year ago when the ABCI reading was 51.9. Panelists continue to have a more positive outlook for the state than the national economy. For fourth quarter 2014, confidence in the Alabama economy registered 56.4, while the U.S. outlook reading was 51.6.
State tax revenues for FY2014, which ended in September, totaled $9.4 billion, up 1.3 percent from the previous fiscal year. Sales tax revenues rose 2.6 percent to $2.1 billion, while corporate income tax receipts increased 4.2 percent. Individual income tax revenues fell a slight 0.04 percent to $3.8 billion. Appropriations to the Alabama Education Trust Fund increased 2.1 percent compared to FY2013 and General Fund appropriations were up 1.0 percent. CBER forecasts tax revenue growth of 1.5 to 2.0 percent for FY2015.
Alabama exports totaled $9.673 billion during the first half of 2014, just below the same period in 2013. Exports to Canada were down slightly, while China, the state’s second largest trading partner, saw an increase. Shipments of transportation equipment rose by $215 million to total around $4.3 billion.
Each quarter business executives across Alabama take the online Alabama Business Confidence Index™ (ABCI) survey, a project of the Center for Business and Economic Research (CBER) in UA's Culverhouse College of Commerce. The recent Q4 2013 survey marked 48 consecutive quarters of ABCI results. Using these survey results, CBER has completed a Validation Analysis comparing statewide trends in the ABCI and its six component indexes against selected national and Alabama economic indicators. The performance analysis also extends to the four metro area ABCIs.
This analysis validates the forecasts by ABCI panelists for an upcoming quarter against the trends documented by relevant historical economic data. Graphs in the ABCI Validation Analysis newsletter show that Alabama business executives have been right on target with their expectations—making the survey results a useful predictor of economic trends in the quarter ahead!
The ABCI panel is open to business executives across the state. Registration and current and historical results are available on the ABCI website. Results newsletters are provided for Alabama and for the Birmingham-Hoover, Huntsville, Mobile, and Montgomery metro areas. Panelists can take the Q1 2014 survey December 1-15.
The Center for Business and Economic Research is now making its detailed forecast tables of Alabama output and employment by sector available quarterly. Table releases in January, April, July, and October are generated by the Center’s Alabama Econometric Model based on current economic conditions and expectations.
To order the current quarter's forecast tables and pay by credit card, please go to the CBER Store, or send a check for $30 payable to The University of Alabama to: Center for Business and Economic Research, Box 870221, Tuscaloosa, AL 35487-0221.
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Center for Business and Economic Research, Box 870221, Tuscaloosa, AL 35487-0221
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