Alabama Business Confidence Index

Third Quarter 2020

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Business Leaders Mildly Optimistic

Business confidence in Alabama increased slightly heading into the third quarter of 2020 according to the most recent ABCI survey. The uncertainty related to COVID-19 is still evident in the component indexes and industry-specific ABCIs, but overall, business leaders in the state are anticipating better economic conditions compared to Q2 2020 with an ABCI of 51.8. This data comes from the Alabama Business Confidence Index (ABCI) survey, which is conducted quarterly by the Center for Business and Economic Research at the University of Alabama’s Culverhouse College of Business.

Third Quarter 2020 Outlook

Statewide Change from Q2
ABCI 51.8 1.3
Alabama Economy 56.2 5.7
US Economy 57.9 14.8
Industry Sales 54.8 1.5
Industry Profits 48.0 -3.9
Industry Hiring 50.6 -3.0
Industry Capital Expenditures 43.0 -7.5


Statewide Component Index Analysis

  • Alabama Economy: With an index of 56.2 after an 5.7-point increase, business leaders forecast improved economic conditions in the statewide economy with moderate confidence.
  • US Economy: The index for the national economy increased 14.8 points to register at 57.9 in this quarter, another moderately confident index that forecasts improved economic conditions compared to Q2 2020.
  • Industry Sales: With a mildly confident index of 54.8 after a 1.5-point increase, Alabama business leaders are anticipating increased levels of sales compared to the previous quarter.
  • Industry Profits: Panelists throughout the state are expecting their profits to decrease in the third quarter with a mildly negative index of 48.0 after a 3.9-point decrease from Q2 2020.
  • Industry Hiring: Business leaders are forecasting a continuation of Q2 2020’s hiring levels in the current quarter; the index decreased 3.0 points to reach a neutral index of 50.6.
  • Industry Capital Expenditures: Capital expenditures are expected to decrease compared to the previous quarter with a moderately confident index of 43.0 after a 7.5-point decrease from the previous quarter.

Statewide Response Breakdown

Statewide Response Breakdown

Participants’ responses reported as percentages

Much Worse Somewhat Worse No Change Somewhat Better Much Better
Alabama Economy 3.8 25.9 19.3 43.4 7.5
US Economy 5.2 26,4 10.4 47.6 10.4
Industry Sales 9.4 17.9 24.1 41.0 7.5
Industry Profits 9.0 28.3 29.2 28.8 4.7
Industry Hiring 9.4 17.0 39.2 30.7 3.8
Industry Capital Expenditures 13.7 21.7 44.3 19.3 0.9


ABCI by Metro Area

CBER’s Forecast for Alabama

The Center for Business and Economic Research has adjusted the Alabama GDP forecast downward and are now anticipating a 5.0-percent decrease for 2020. Alabama GDP has been steadily increasing since 2010, except in 2014 when it decreased 0.7 percent. Employment is expected to decrease 2.3 percent in 2020, and CBER forecasts tax revenues increasing by 1.0 percent in the 2019-2020 fiscal year.

Varied Confidence in Metro Areas

Business confidence varied throughout the state’s four largest metro areas this quarter. Business leaders in Birmingham–Hoover and Mobile expressed some negative expectations for the coming quarter while panelists in Huntsville and Montgomery anticipate economic growth compared to Q2 2020. The ABCI for Mobile was the most negative at 44.9, indicating that panelists are moderately confident forecasting decreased economic activity in Q3 2020 compared to the previous quarter. Birmingham–Hoover followed closely behind with an ABCI of 44.7. Montgomery business leaders forecast economic expansion this quarter with a very mildly confident index of 51.0. Panelists in Huntsville have the most positive expectations with a moderately confident index of 57.4 in the third quarter of 2020.


Metropolitan Statistical Area (MSA): Third Quarter 2020 Outlook

Statewide Birmingham-Hoover Huntsville Mobile Montgomery
ABCI 51.8 44.7 57.4 44.9 51.0
Alabama Economy 56.2 49.3 61.1 53.3 56.0
US Economy 57.9 51.4 61.4 53.3 60.7
Industry Sales 54.8 48.6 62.3 43.5 53.6
Industry Profits 48.0 41.7 53.7 40.2 42.9
Industry Hiring 50.6 41.0 60.2 42.4 48.8
Industry Capital Expenditures 43.0 36.1 45.7 37.0 44.0


Industry Component Index: Third Quarter 2020 Outlook

ABCI Change from Q2 Sales Profits Hiring Capital Expenditures
Healthcare/Social Assistance Services 62.8 5.7 68.8 58.3 54.2 41.7
Manufacturing 58.1 5.6 59.8 50.8 56.1 53.0
Professional/Scientific/Technical Services 54.8 7.4 60.3 54.9 57.6 44.6
Transportation/Information/Utilities 52.9 -1.9 55.0 47.5 42.5 53.5
Statewide 51.8 1.3 54.8 48.0 50.6 43.0
Wholesale Trade 50.5 -4.1 56.2 50.0 40.6 37.5
Finance/Insurance/Real Estate 48.1 -2.0 55.0 47.5 48.3 43.3
Retail Trade 46.4 13.8 53.1 46.9 50.0 37.5
All Other Services 45.8 -1.7 44.1 39.4 45.7 34.0
Construction 44.3 -16.5 42.9 35.7 44.6 41.1


Industries Offer Mixed Forecasts for Q3 2020

In the Q3 2020 survey, many industries are anticipating increased levels of one component index while forecasting decreased levels of another. All but two industries are expecting their sales to increase compared to Q2 2020. On the other side, all but two are forecasting decreased capital expenditures this quarter. Healthcare and social assistance services had the highest ABCI at 62.8, which was fueled by especially strong confidence in increased sales (68.8) but tempered by moderately confident forecasts for decreased capital expenditures (41.7). Panelists in manufacturing are feeling moderately confident about improved economic conditions in Q3 2020, with indexes ranging from a neutral profits index (50.8) to a moderately confident sales index (59.8). After three quarters of very confident forecasts for growth, this survey’s construction ABCI is the lowest industry index at a moderately negative 44.3. Panelists in the industry are anticipating sales, hiring, profits, and capital expenditures to decrease compared to Q2 2020.

  • Industry Sales: Indexes for industry sales had the largest spread in the Q3 2020 survey, ranging from 68.8 (healthcare and socail assistance services) to 42.9 (construction). Panelists in seven of the nine industry categories anticipate an increase in sales with confidence ranging from mild to very strong. Two industries forecast a decrease in sales compared to Q2 2020: “all other services” and construction. The “all other services” category includes management of companies and enterprises; education services; arts, entertainment, and recruitment; accommodation and food services; and other services that do not fit into the survey’s other categories. Construction’s sales index decreased 25.9 points from Q2 2020 to reach a moderately negative 42.9 in the third quarter survey.
  • Industry Profits: In the Q3 2020 survey, forecasts for industry profits ranged from positive with moderate confidence to negative with strong confidence. Healthcare and social assistance had the highest profits index, forecasting increased profits compared to Q2 2020 with moderately confident 58.3. Panelists in manufacturing and in wholesale trade expect a continuation of the previous quarter’s profits with neutral indexes around 50. Five of the nine industry groups have a negative profits index this quarter, with the lowest being construction (35.7) and “all other services” (39.4). Indexes below 40 signify strong confidence in negative forecasts.
  • Industry Hiring: Industries are also divided on hiring forecasts this quarter: three industries expect to increase hiring this quarter, one anticipates a continuation of Q2 2020’s levels, and five believe their hiring will decrease with varying levels of confidence. Panelists in professional, scientific, and technical services have the highest hiring index at a moderately confident 57.6. The lowest hiring index was in finance, insurance, and real estate at 40.6, indicating moderately strong confidence in their negative forecast.
  • Industry Capital Expenditures: Industries are largely forecasting decreased capital expenditures this quarter, with negative indexes for seven of the nine categories. Panelists in “all other services,” retail trade, and wholesale trade had the lowest indexes at 34.0, 37.5, and 37.5, respectively. These indexes indicate strong confidence in their negative forecasts. This quarter, even the most positive capital expenditure indexes only indicated mild confidence. Manufacturing and transportation, information, and utilities registered at 53.0 and 52.5, respectively.


Firm Size: Third Quarter 2020 Outlook

Number of Employees
0 to 19 20 to 99 100+
ABCI 52.9 53.3 49.0
Alabama Economy 55.6 57.7 56.1
US Economy 58.1 57.0 58.3
Industry Sales 55.6 58.3 50.8
Industry Profits 50.0 48.7 44.7
Industry Hiring 52.0 53.9 45.8
Industry Capital Expenditures 45.8 44.3 38.3

Firms Continue to Forecast with Mild Confidence

  • In the Q3 2020 survey, mid-sized firms, those with 20 to 99 employees, have the highest ABCI at 53.3. This mildly confident index is built on moderately confident forecasts for improvements in the Alabama and US economies, as well as expectations for higher industry sales compared to the previous quarter. Panelists in mid-sized firms are forecasting decreased profits and capital expenditures compared to the previous quarter.
  • Small firms, those with fewer than 20 employees, also have a mildly positive ABCI this quarter. These business leaders are feeling moderately confident about the general economy improving and sales increasing. They anticipate a continuation of the previous quarter’s level of profits, and expect capital expenditures to decrease with moderate confidence.
  • Panelists in large firms, those with 100 or more employees, had the lowest ABCI this quarter at a mildly negative 49.0. Business leaders in these large firms were most confident in their forecast for decreased capital expendures, and are moderately confident that profits will also decrease compared to Q2 2020. However, panelists in these firms are expecting statewide and national economic conditions to improve this quarter.
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The Center for Business and Economic Research would like to thank the 212 Alabama business executives who completed the third quarter 2020 ABCI survey. This is the 75th consecutive quarter this report has been recorded, and it would not have been possible without your participation.

Be sure to log in during the September 1–15 survey window to record your opinions about economic prospects and industry performance looking ahead to the fourth quarter of 2020.

Analysis provided by Susannah Robichaux, Socioeconomic Analyst, Center for Business and Economic Research, Culverhouse College of Business,The University of Alabama.