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  • A Wave of Optimism

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    Montgomery business executives have a positive outlook for Alabama’s economy 

    September 2015
    By David Zaslawsky

    For the sixth straight quarter – that’s 1 and ½ years – Montgomery business leaders have been the most optimistic in the state’s four metro centers.

    As impressive as that is, Montgomery business leaders have been the most optimistic in 13 of the past 17 quarters in the Alabama Business Confidence Index. In the 2015 third quarter index, Montgomery lost 2.7 points to 57.4, but actually increased its lead over No. 2, which this time is Huntsville with a 55.1 index, followed by Mobile at 54.3 and Birmingham-Hoover at 53.1. Mobile fell the most – 4.8 points – from the second quarter.

    Montgomery’s 57.4 third-quarter index was actually its lowest since a 55.4 index in the first quarter of 2014, but the Capital City topped all the other metros in four of the six individual components. Montgomery had the highest index for the third-quarter national economy outlook (54.5); industry sales (62.5); industry profits (59.8); and industry hiring (58.0). Montgomery (53.6) ranked second to Birmingham for capital expenditures and was third behind Huntsville and Mobile in the Alabama economy component at 56.3.

    Montgomery panelists in the ABCI, which is conducted by the Alabama University Center for Business and Economic Research in the Culverhouse College of Commerce, expect the third quarter will be the same for both the national economy and state economy. About 35 percent expect an improvement in the national economy and 39 percent forecast an improving Alabama economy.

    A majority – 54 percent – are forecasting third-quarter sales to improve compared with 39 percent expecting no change. Another 50 percent expect third-quarter profits to increase and again 39 percent expect no change from the second quarter. The panelists were not quite as upbeat about third-quarter hiring and capital expenditures. Thirty-nine percent are forecasting an increase in both those components compared with 54 and 50 percent, respectively expecting no change in hiring and capital expenditures.

    Those expecting declines in the third quarter range from 14 percent (national economy) to 7 percent (sales and hiring).

    The overall third-quarter Alabama Business Confidence Index declined 2.8 points from the previous quarter to 54.8, which still shows expansion. All of the components declined from the previous quarter. The following is a component-by-component third quarter breakdown:

    NATIONAL ECONOMY This component dropped the most – 5.8 points to 50.7, which is barely positive. About a quarter expect a decline in the quarter compared with nearly 28 percent expecting an increase. About 46 percent expect the quarter to remain the same as the second quarter. The most optimistic sectors are finance, insurance, real estate, construction, professional, scientific and technical services while retail trade is the most pessimistic.

    ALABAMA ECONOMY The component fell 1.8 points to 56.6, which is the second best component. Nearly three times as many panelists expect an improved quarter than those forecasting a decline. About 47 percent expect the quarter to remain the same.

    INDUSTRY SALES Although the component declined 3.2 points from the second quarter, at 58.3 it has the highest index of any component. About 48 percent expect an increase in sales compared with 17 percent expecting a decline. About 35 expect no change. The most optimistic sectors are professional, scientific and technical services, wholesale trade and finance.

    INDUSTRY PROFITS The component declined the least, falling 1.1 points to 55.7. About twice as many expect an increase vs. a decline while 40 percent expect no change. All sectors except retail trade are forecasting an increase in profits.

    INDUSTRY HIRING This component also declined 3.2 points from the second quarter and fell to 53.9. Once again, twice as many survey respondents – 29 percent vs. 13.5 percent – are forecasting an increase vs. a decline. Another 57 percent expect no change. The most upbeat sectors are construction, health care and finance. Retail trade is the most negative sector.

    CAPITAL EXPENDITURES The component fell 2.2 points to 53.2. About 27 percent are forecasting an increase in third-quarter spending compared with 15 percent expecting a decline. About 57 percent are expecting capital expenditures to remain the same as the second quarter. The most optimistic sectors are health care, manufacturing, finance, insurance, real estate, professional, scientific and technical services; wholesale trade, transportation, information and utilities. The construction and retail trade sectors are the most pessimistic.