Montgomery’s Confidence Points to a Strong First Quarter
March 2016
By David Zaslawsky
The streak of Montgomery having the most optimistic business leaders has ended at seven quarters after being overtaken by Mobile.
Mobile topped all metros in the quarterly Alabama Business Confidence Index (ABCI) with a 57.3 index in the first quarter of 2016. Montgomery was second at 55.7 with Huntsville third at 52.9 and Birmingham-Hoover fourth with a 50.5 index.
Montgomery still has been No. 1 in 14 of the last 19 quarterly surveys conducted by The University of Alabama’s Center for Business and Economic Research in the Culverhouse College of Commerce.
The Montgomery confidence index actually rose 1.5 points from the 2015 fourth quarter, but Mobile’s index increased 3.4 points from the same quarter. Birmingham-Hoover index was up just slightly with 0.9 points while Huntsville jumped from a negative outlook to positive with a 4.0-point gain.
All six of the individual components for Montgomery are higher than or equal to the overall Alabama Business Confidence Index, which points to a strong first quarter in the Capital City.
Montgomery’s first-quarter industry sales index rose 2.8 points to 59.2. The outlook for first-quarter hiring was up 1.3 points at 55.9 and the industry profit index gained 2.4 points from the fourth quarter to 55.3. The indexes for the national economy, state economy and capital expenditures were all at 54.6.
There was a wide disparity between Montgomery executives forecasting an improved quarter vs. a worse quarter:
National economy (34.2 percent vs. 13.2 percent).
Alabama economy (31.6 percent vs. 13.2 percent).
Industry sales (44.7 percent vs. 10.5 percent).
Industry profits (31.6 percent vs. 13.2 percent).
Industry hiring (34.2 percent vs. 13.2 percent).
Capital expenditures (26.3 percent vs. 7.9 percent).
The overall 2016 first-quarter ABCI increased 1.8 points from the 2015 fourth quarter to 53.0, but is still the second-lowest index since the 2014 fourth quarter. The lone individual component that declined from the fourth quarter was the national economy forecast, which fell just 0.1 point.
The following is a breakdown of the six components for the 2016 first quarter:
NATIONAL ECONOMY It is the only component in negative territory at 49.2. About 28 percent are expecting the first quarter to be worse than the fourth quarter of 2015 while about 26 percent are forecasting an improved quarter. About 46 percent expect no change. Businesses with 100 or more employees are the most upbeat about the first quarter while businesses with fewer than 20 employees are the most pessimistic.
ALABAMA ECONOMY The index rose 2.6 points from the fourth quarter – the largest gain of any component. With an index at 54.6 it is 5.4 points higher than the national economy index. By a more than 2-to-1 margin (32.5 percent vs. 14.7 percent) panelists expect the year’s first quarter to outperform the 2015 fourth quarter. About 53 percent expect the quarter to be the same as the previous quarter.
INDUSTRY SALES The component increased 2.5 points from the previous quarter for a 55.8 index – the highest of any of the components. About 42 percent of the survey respondents expect to see an increase in the first quarter compared with 20 percent forecasting a first-quarter decline in sales. About 38 percent expect no change from the fourth quarter. The most optimistic sectors are health care, professional, scientific and technical. The retail trade sector is the most pessimistic.
INDUSTRY PROFITS The component was up 2.4 points from the fourth quarter for an index of 53.0. About 35 percent are forecasting an improved quarter, but nearly 24 percent are expecting first-quarter profits to decline from the fourth quarter. Forty percent expect the same results.
INDUSTRY PROFITS The component gained 2.1 points from the previous quarter for a 53.0 index. More than half of the respondents (55 percent) are expecting no change from the previous quarter while 30 percent expect an increase and 16 percent are forecasting a decline. The most upbeat sectors are manufacturing, professional, scientific and technical while the most pessimistic sectors are retail trade and wholesale trade.
CAPITAL EXPENDITURES The component was up 1.5 points from the previous quarter for an index of 52.4, which is only higher than the national economy index. While 54 percent expect no change in the first quarter, about 28 percent are forecasting an improved quarter compared with 18 percent expecting a decline. The most upbeat sectors are manufacturing, health care, transportation, information and utilities. The least optimistic sectors are retail trade, professional, scientific and technical.
