Alabama Business Confidence Index

Alabama Business Confidence Index™

Fourth Quarter 2020

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Moderate Business Confidence this Quarter

Heading into the fourth quarter of 2020, business confidence in Alabama continued to increase slightly according to the most recent ABCI survey. The impact of COVID-19 is seeming to lessen as business leaders innovate and adjust to the new safety measures, with all of the statewide component indexes registering above 50. 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.

Fourth Quarter 2020 Outlook


Statewide Change from Q3
ABCI 55.2 3.4
Alabama Economy 59.8 3.6
US Economy 57.5 -0.4
Industry Sales 57.5 2.7
Industry Profits 52.0 4.0
Industry Hiring 53.8 3.2
Industry Capital Expenditures 50.4 7.4

 

Statewide Component Index Analysis

  • Alabama Economy: The statewide economy is expected to improve compared to the previous quarter with a strongly confident index of 59.8 after a 3.6-point increase from the previous quarter.
  • US Economy: With an index of 57.5 after a 0.4-point decrease, business leaders continue to forecast improved economic conditions in the national economy with moderate confidence.
  • Industry Sales: The index for industry sales increased 2.7 points to register at 57.5 in this quarter. This moderately confident index forecasts increased sales in Q4 2020 compared to Q3 2020.
  • Industry Profits: With a mildly confident index of 52.0 after a 4.0-point increase, expectations for increased industry profits are rebounding this quarter.
  • Industry Hiring: Panelists throughout the state are expecting their hiring to increase in the fourth quarter with a mildly positive index of 53.8 after a 3.2-point increase from the previous quarter.
  • Industry Capital Expenditures: Business leaders are forecasting a continuation of the previous quarter’s capital expenditure levels this quarter; the index increased 7.4 points to reach a neutral index of 50.4 after being moderately negative in Q3 2020.

Statewide Response Breakdown

Statewide Response Breakdown

Participants’ responses reported as percentages


Much Worse Somewhat Worse No Change Somewhat Better Much Better
Alabama Economy 0.0 20.0 27.6 45.7 6.7
US Economy 1.4 24.3 24.3 42.9 7.1
Industry Sales 2.9 18.1 28.6 47.1 3.3
Industry Profits 3.8 24.3 33.3 37.1 1.4
Industry Hiring 2.9 16.7 47.1 29.0 4.3
Industry Capital Expenditures 8.6 16.2 43.8 28.1 3.3

 

 

CBER’s Forecast for Alabama

The Center for Business and Economic Research is forecasting a 3.4-percent decrease in the Alabama GDP for 2020. This comes after a 29.6-percent drop in ALGDP in Q2 2020 and assumes that state will continue towards the path of recovery in Q4 2020. Employment is forecasted to decrease 3.0 percent in 2020, and CBER expects total tax revenues to still increase by 5.0 percent for FY2020. Read more about CBER’s latest forecasts for the statewide and national economies in the free Alabama Business publication.

Metro Confidence Ranges from Neutral to Strong Optimism

This quarter, overall business confidence throughout the state’s five largest metro areas ranged from neutral to very positive. Excluding Mobile’s neutral indexes, the consensus among the remaining four metros was that the Alabama economy would improve and sales would likely increase compared to Q3 2020. Montgomery had the highest ABCI at 61.5, indicating strong confidence in growth compared to the previous quarter. Huntsville and Birmingham had moderately confident ABCIs in the Q4 2020 survey, with all of their component indexes registering above 50 this quarter. Both the Tuscaloosa and Mobile metro areas had a mix of positive, neutral, and negative component indexes, though their ABCIs were ultimately neutral at 50.4 and 50.2, respectively.

ABCI by Metro Area

Metropolitan Statistical Area (MSA): Fourth Quarter 2020 Outlook


Statewide Birmingham-Hoover Huntsville Mobile Montgomery Tuscaloosa
ABCI 55.2 55.3 56.9 50.2 61.5 50.4
Alabama Economy 59.8 60.6 60.8 50.0 65.0 55.7
US Economy 57.5 60.0 57.3 51.3 68.8 50.0
Industry Sales 57.5 56.9 59.5 50.0 67.5 53.3
Industry Profits 52.0 50.6 53.0 51.3 53.8 48.6
Industry Hiring 53.8 51.2 56.0 53.9 62.5 49.1
Industry Capital Expenditures 50.4 52.5 54.7 44.7 51.2 45.8

 

Increased Industry Confidence in Q4 2020

Business confidence increased for almost all industry categories, likely the result of a slight decrease in uncertainty related to COVID-19. Almost all of the industries’ ABCIs registered at or above 53.7, indicating mild to strong expectations for growth in the coming quarter compared to Q3 2020. Only the “All Other Services” ABCI was below 50, registering at a neutral 49.7 with negative forecasts for profits, hiring, and capital expenditures. 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 don’t fit into the survey’s other categories. In the two years before the pandemic, business confidence for panelists in the “All Other Services” category was some of the strongest, with an average industry index of 64.3 in the eight months from Q2 2018 to Q1 2020. Beginning in Q2 2020, the industry’s ABCI has registered below 50; though this quarter, panelists in the industry group expressed moderate confidence in increased sales which brought its industry index up to a neutral 49.7.

Industry Component Index: Fourth Quarter 2020 Outlook


ABCI Change from Q3 Sales Profits Hiring Capital Expenditures
Wholesale Trade 65.1 14.6 62.5 53.1 50.0 68.8
Retail Trade 62.0 15.6 62.5 56.2 59.4 53.1
Healthcare/Social Assistance Services 60.8 -2.0 58.3 64.6 66.7 56.2
Professional/Scientific/Technical Services 56.7 1.9 60.5 57.9 56.6 52.6
Transportation/Information/Utilities 56.5 8.4 60.3 53.2 55.8 55.1
Finance/Insurance/Real Estate 55.4 2.5 57.1 53.6 53.6 42.9
Statewide 55.2 3.4 57.5 52.0 53.8 50.4
Manufacturing 53.8 -4.3 50.8 47.7 52.3 47.7
Construction 53.7 9.4 54.4 48.5 58.8 50.0
All Other Services 49.7 3.9 56.1 46.1 45.6 42.2

 

  • Industry Sales: Industries are largely forecasting increased sales this quarter, with positive indexes for all nine of the categories. Panelists in wholesale trade; retail trade; professional, scientific, and technical services; and finance, insurance, and real estate had indexes above 60, conveying strong confidence in their positive forecasts. Manufacturing had the lowest sales index at a very mildly confident 50.8, which, almost being a neutral index, indicates expectations for a continuation of the previous quarter’s level of sales.
  • Industry Profits: Though the indexes for profits increased for eight of the nine industry categories from Q3 to Q4 2020, industries’ forecasts for profits were were more conservative than the sales indexes this quarter. Only healthcare professionals expressed strong confidence in increased profits with an index of 64.6. Business leaders in professional, scientific, and technical services, as well as those in retail trade, had moderate confidence that their profits would increase compared to the previous quarter. Business confidence for the remaining six industries’ profits were mild: half had mildly positive forecasts, ranging from 53.1 to 53.6, while the other half had mildly negative forecasts, ranging from 46.1 to 48.5.
  • Industry Hiring: In the Q4 2020 survey, seven of the nine industry categories forecast increased hiring compared to the previous quarter. For the second consecutive quarter, healthcare and social assistance had the highest hiring index at 66.7, forecasting increased hiring compared to Q3 2020 with strong confidence. Retail trade; construction; and professional, scientific, and technical services also forecast growth in the coming quarter with moderate confidence. Panelists in wholesale trade expect a continuation of the previous quarter’s hiring with a neutral index of 50.0. “All Other Services” was the only industry group to have a negative hiring index this quarter, with a moderately negative index of 45.6.
  • Industry Capital Expenditures: Industries are divided on capital expenditure forecasts this quarter: five industries expect to increase capital expenditure this quarter with varying levels of confidence, one anticipates a continuation of Q3 2020’s levels, and three believe their capital expenditure will decrease compared to their Q3 2020 levels. Panelists in wholesale trade have the highest capital expenditure index at a very strongly confident 68.8. The lowest capital expenditure index was in “All Other Services” at 42.2, indicating moderately strong confidence in their negative forecast.

 

Firm Size: Fourth Quarter 2020 Outlook


Number of Employees
0 to 19 20 to 99 100+
ABCI 55.5 56.0 54.2
Alabama Economy 57.6 62.1 60.3
US Economy 53.8 60.3 59.3
Industry Sales 58.9 54.5 58.3
Industry Profits 53.5 48.7 53.0
Industry Hiring 56.3 57.1 48.7
Industry Capital Expenditures 52.8 53.1 45.7

Slight Increase to Confidence for All Firm Sizes

  • In the Q4 2020 survey, mid-sized firms, those with 20 to 99 employees, continued to have the highest ABCI at 56.0. Business leaders in these firms were most confident in their forecasts for improved economic conditions in the statewide and national economies compared to Q3 2020. The industry component indexes were varied in mid-sized firms, with moderately strong forecasts for increased hiring coupled with mildly negative expectations for decreased profits in Q4 2020.
  • Small firms, those with fewer than 20 employees, also have a moderately positive ABCI this quarter at 55.5. Firms of this size were most confident in an improved Alabama economy and higher industry sales compared to the previous quarter. Panelists in small firms had no negative component indexes this quarter.
  • Panelists in large firms, those with 100 or more employees, had an Q4 2020 ABCI of 54.2, indicating mild confidence in growth compared to the previous quarter. These business leaders are feeling moderately confident about the general economy improving and increased industry sales, but they are anticipating decreased hiring and capital expenditures with mildly negative forecasts of 48.7 and 45.7, respectively.
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The Center for Business and Economic Research would like to thank the 220 Alabama business executives who completed the fourth quarter 2020 ABCI survey. This is the 76th consecutive quarter this report has been recorded, and it would not have been possible without your participation.

Be sure to log in during the December 1–15 survey window to record your opinions about economic prospects and industry performance looking ahead to the first quarter of 2021.

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

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