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 Alabama economy is expected to grow around 2.0 percent during 2013, according to the fourth quarter forecast update from the Center for Business and Economic Research (CBER) in The University of Alabama's Culverhouse College of Commerce. With federal spending cutbacks and now the budget impasse hitting some areas of the state pretty hard, that's a weaker forecast than the 2.2 percent annual growth forecast last quarter. Still, the state's anticipated increase in real GDP is better than the 1.5 percent gain forecasted for the U.S. economy this year by IHS Global Insight. Economic activity should accelerate in 2014, when Alabama's real GDP is expected to increase by about 3.0 percent.
Statewide about 10,000 to 15,000 jobs could be added in 2013 for a gain of close to 1.0 percent. Most job growth will be in transportation equipment manufacturing, food services and drinking places, administrative and support services, and in healthcare and social assistance. The annual pace of job creation could pick up to around 1.4 percent during 2014.
Alabama's seasonally-adjusted unemployment rate was 6.3 percent in August, down from 7.5 percent a year ago. About 70 percent of this drop was accounted for by an increase in total employment and the remainder is due to a decline in the civilian labor force.
A total of 9,700 nonfarm jobs were added between August 2012 and August 2013, a 0.5 percent gain. Manufacturers added a net 4,300 workers during the past 12 months, with gains concentrated in transportation equipment and plastic and rubber products. The state's service providing sector gained 6,900 jobs. However, services job creation continues to be strongest in industries such as accommodation and food services, retailing, and administrative and support services—typically sectors that pay relatively lower wages and often offer fewer benefits.
Alabama exports totaled $9.7 billion in the first half of 2013, down 3.1 percent from the same period in 2012. This follows a 9.0 percent increase between 2011 and 2012. Although exports declined in most industries, shipments of transportation equipment rose $205 million to around $4.1 billion.
The state's tax receipts totaled almost $9.3 billion in FY2013, an increase of about 4.0 percent from FY2012. While sales tax revenues rose just 1.6 percent, both corporate and individual income tax receipts were up more than 6 percent. CBER expects FY2014 total tax receipts to be around 4.2 percent higher than last fiscal year.
Business sentiment among executives statewide, measured by CBER's Alabama Business Confidence Index™ (ABCI), slipped 1.0 point to 51.9 on the fourth quarter 2013 survey. The outlook remained positive in spite of growing economic uncertainty. Business executives forecast moderate expansion for the state's economy during the fourth quarter, with U.S. economic growth about the same as in the third quarter. Sentiment in the Mobile metro area is the most positive, followed by Montgomery and Birmingham-Hoover, although optimism in all three areas is down slightly this quarter. The Huntsville business outlook is moderately negative but stable.
After a strong boost in confidence last quarter, Alabama business expectations settled down going into the fourth quarter of 2013. The Alabama Business Confidence Index™ (ABCI) slipped one point to 51.9, staying positive despite the economic uncertainties that loomed as the 248 panelists completed the online survey during the first two weeks of September. At this level, Alabama business expectations are 3.6 points above the reading of 48.3 a year ago. However, the fourth quarter 2013 ABCI lags the long-term average of 53.5 calculated over the 48 quarters that UA's Center for Business and Economic Research (CBER) has surveyed business confidence across Alabama.
The state's business executives expect U.S. economic growth in the fourth quarter to be only slightly better than last quarter. The U.S. economy index slipped 0.2 points to 50.4, with 44.4 percent forecasting no change and a net 5.6 percent expecting improvement. Panelists are considerably more optimistic about Alabama's economic outlook. An index of 56.0 indicates moderate economic expansion. That's a much better reading than the value of 49.7 seen a year ago in the fourth quarter of 2012. The state economy index has been above the national outlook for 34 consecutive quarters.
Among industry indicators, only hiring plans improved this quarter. A slight increase in Alabama job growth is indicated, with the hiring index at 50.8. The strongest job gains could come from manufacturers. Most industries expect at least a slight increase in hiring, with the exceptions of trade and healthcare where prospects are negative.
Sales statewide should increase moderately in the fourth quarter, despite weakening expectations. The sales index of 54.3 was down 3.5 points from its third quarter reading. Holiday spending could be stronger this year than last; the fourth quarter 2012 sales index was lower at 51.1. Overall prospects for profits are not as positive as last quarter, with the index down 1.7 points to 51.5. Expectations for sales and profits growth are highest in financial activities. Manufacturers should also see strong sales gains this quarter.
A difficult environment for long-range planning could be weighing on the willingness of Alabama businesses to commit more funds to capital investment. The capital expenditures index fell 2.3 points to 48.4. While just over half of panelists expect to maintain current spending levels, a net 2.4 percent plan to cut back.
Huntsville business confidence edged up 0.1 points to 45.8, stable but still indicating moderate contraction. In the other large metro areas tracked by the ABCI survey, the business community is optimistic about fourth quarter prospects despite modest declines in confidence. ABCI Mobile is on top at 58.0, followed by Montgomery with 54.3, and Birmingham-Hoover at 53.3.
Alabama businesses employing 100 or more remained the most optimistic, although their ABCI slipped 0.7 points to 53.6. These larger firms are the most likely to increase hiring in the fourth quarter. Sentiment among businesses employing 20 to 99 edged up 0.1 points to 50.7, a mildly positive reading despite negative outlooks for the U.S. economy and capital spending. The ABCI for small businesses employing fewer than 20 fell 2.2 points to a still-positive 51.0. Hiring and investment are likely to slow for these firms.
The momentum in Alabama’s economy during the second half of 2012 should continue into 2013, 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, discussed developments in the state during 2012 and prospects for 2013 at the Center’s 25th annual Economic Outlook Conference. Around 160 attended the meeting, held January 16th in Montgomery.
Real GDP growth of 1.7 to 1.9 percent is forecasted for 2013, with employment gains of almost 1.1 percent, or around 18,500 net new jobs, during the year. Growth could be stronger if uncertainty is reduced concerning fiscal policy at the national level. Total state tax revenues are expected to rise around 3.5 percent in FY2013, slightly below the 3.8 percent rate of increase seen in FY2012.
Strong gains in Alabama’s automotive manufacturing industry, increasing exports, and an improving housing market will add to the momentum this year. Rising wages and income across the state indicate that consumer spending will be a positive for growth going forward. Firms in industries including professional and business services, healthcare, tourism, and retail trade will also contribute to employment gains during 2013.
Dr. Addy discussed the importance of addressing how we could apply resources to ensure continuing improvement in the state’s economy. Enhancing education and workforce development programs are key to providing workers with the skills needed by new and expanding businesses. Alabama currently has an available labor pool of around 650,000 residents who are either unemployed or underemployed (employed but looking for better jobs). But the demographics of an aging population together with slow population growth mean that the state will have to look to both domestic and international in-migrants and to increased labor force participation, training, and productivity to keep economic growth strong in the longer term.
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, expects GDP growth in the 2.3 to 3.0 percent range during 2013 as the nation continues to climb out of a deep hole. The Federal Reserve will exercise its tools of very low interest rates and quantitative easing until the economy improves significantly. Resolving federal fiscal policy uncertainty is critical to unleashing stronger potential for growth.
Retirement Systems of Alabama CEO, Dr. David Bronner, took a look at past and future economic concerns. At the national level, investing in infrastructure and improving access to education are essential to ensuring future competitiveness. Resolving the gridlock in Washington will encourage business investment. Alabama has made a lot of progress over the last 15 years in areas including tourism, the auto industry, and aerospace. But, as Dr. Bronner noted, education is the key ingredient in a better future for all our citizens.
The 2013 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, Sterne Agee, and Vulcan Materials.
View presentations from the 2013 Economic Outlook Conference
Dr. David Altig’s presentation: The Economy—A View from the Fed
Dr. Sam Addy’s presentation: The Alabama Outlook
Check out press coverage of the 2013 Economic Outlook Conference
al.com (Birmingham News, Huntsville Times, Mobile Press Register)
The Anniston Star
The Gadsden Times
The Montgomery Advertiser
The Tuscaloosa News
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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