AlabamaBusinessConfidenceTurnsPositiveThe statewideAlabamaBusinessConfidenceIndex(ABCI)rose 5.2pointsto52.9onthethirdquarter2013survey.Thats thefirstoptimisticreadingsincethirdquarterayearago whentheindexregisteredaweaklypositive50.2.The operatingenvironmentshouldnotbeadragonbusiness prospectsgenerallythisquarter,asboththenationaland Alabamaeconomyindexesclimbedabove50. Allindustryindicatorsalsomovedhigher.Expectations forsalesroseto57.8,forecastingrelativelystronggains statewide,whileprofitswillincreasemoderately.Still, Alabamabusinessesaresignalingthattheyarenotyet readytoaddtoemploymentorrampupcapitalspending. Thepaceofhiringwillbeaboutthesameaslastquarter, whileinvestmentcouldincreaseslightly.

Thefinancialactivitiessectorhasthemostrobust outlookforthethirdquarter,whilefirmsinconstruction; transportation,information,andutilities;wholesaletrade; andotherservicesaremoderatelyoptimistic.Althoughstill mildlypositive,manufacturingconfidenceisdownand hiringisexpectedtoslowcomparedtothesecondquarter. Mobilepanelistsarethemostoptimisticabouttheir prospects,withanareaABCIof59.Confidenceinthe Montgomerymetroroseto56.6,andBirminghamHoover businessesregisteredanimproved54.4.Althoughup significantly,theHuntsvilleoutlookremainsconstrained byfederalspendingcutbacksandthesequesterat45.7.

ThirdQuarter2013Outlook

Alabama

Changefrom Q22013

ABCI NationalEconomy AlabamaEconomy IndustrySales IndustryProfits IndustryHiring CapitalExpenditures

Indexabove50indicatespositiveoutlook. Indexbelow50indicatesnegativeoutlook.

52.9 50.6 55.2 57.8 53.2 50.0 50.7

5.2 10.1 7.9 3.9 3.2 3.2 3.0

BusinessEnvironmentExpectations
Q32013comparedtoQ22013
ModestUptickinU.S.EconomyForecastWiththe sequesternowentrenchedandnomajorchallengesonthe immediatehorizon,ABCIpanelistsonaverageexpectthe U.S.economytoperformslightlybetterinthethirdquarter of2013thaninthepriorquarter.Thenationaleconomy indexjumped10.1pointsto50.6,withanet5.5percentof businessexecutivesanticipatingimprovement.Still,while employment,housingmarkets,andsomeconsumer spendinghavebeenpickingup,civilservantfurloughsand cutbacksinfederalspendingoncontractsarenegatively impactingtheeconomythisquarter.Panelistsinthe HuntsvillearearemainpessimisticaboutboththeU.S. andAlabamaeconomies,withanationaleconomyindexof 42.1andastateindexof44.6.

ABCITM
100 90 80 70 60

56.8 51.4 45.5 50.8 50.2 48.3 45.4 47.7

NationalandAlabamaEconomy
52.9

Index

50 40 30 20 10 0

MuchBetter SomewhatBetter RemaintheSame SomewhatWorse MuchWorse

1.2 1.6

Alabama

National

41.6 33.3 35.7 35.7 20.0 24.7 1.6 4.7

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 201120122013

Percent

Third Quarter 2013, Volume 12, Number 3

AlabamaEconomyShouldImproveintheThirdQuarter Expectationsforthestateseconomicperformanceare positiveforthefirsttimesincethirdquarterayearago. TheAlabamaeconomyindexregistered55.2,up7.9points fromlastquarter.Animprovedoperatingenvironment shouldhelpboostprospectsforthestatesbusinesses duringtheJulytoSeptemberperiod.Almost43percentof executivescompletingthesurveyanticipateabetterstate economythisquarter,while35.7percentforecastno change;just21.6percentthinktheeconomywillfare worse.Employmentisrisingfasterthanthelaborforce, keepingthestatesseasonallyadjustedunemploymentrate wellbelowtheU.S.rate.Andnonfarmjobscontinueto climb,fueledbystronghiringinleisureandhospitalityand inadministrativesupport.

U.S.andAlabamaEconomy
ExpectationsversusPriorQuarter
60 55

Alabama

55.2 50.6

Index

50 45 40 35 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010201120122013

United States

IndustryPerformanceExpectations
Q32013comparedtoQ22013

Sales
StrongIncrease ModerateIncrease NoChange ModerateDecrease StrongDecrease 0

2.8 47.8 29.0 18.4 2.0

10 20 30 40 50 60

Profits
StrongIncrease ModerateIncrease NoChange ModerateDecrease StrongDecrease 0

1.2 38.0 37.3 19.6 3.9

10 20 30 40 50 60

HiringPlans
StrongIncrease ModerateIncrease NoChange ModerateDecrease StrongDecrease 0

0.8 26.3 50.6 16.9 5.5

10 20 30 40 50 60

SalesandProfitExpectationsReboundSalesexpectations movedhigherforasecondstraightquarter,rising3.9 pointsto57.8.Withconsumersentimentandfinances improving,50.6percentofAlabamabusinessexecutives areoptimisticthatsaleswillincreaseinthethirdquarter. Thatcontrastswithjust20.4percentforecastingadecline. Salesgrowthshouldbestrongestinthefinance,insurance, andrealestatesector,wherealmost73percentof panelistsexpectanincrease.Mostbusinessesinwhole saletrade;transportation,information,andutilities;and constructionalsothinksaleswillbehigherthisquarter. Nowthattheimpactofthesequesterisbetterknown, professional,scientific,andtechnicalservicesfirmsexpect overallindustrysalestobeaboutthesameaslastquarter. Theprofitsindexmovedup3.2pointsto53.2,indicating growthinearningsforthefirsttimesincethethirdquarter of2012.Over76percentofrespondentsthinkprofitsin theirindustrywillbeaboutthesameorhigherthaninthe secondquarter.Overall,anet15.7percentexpectprofits toincreasethisquarter.About58percentoffinancial activitiesfirmsandhalfofwholesalersseeanupsideto profits.However,industryprofitabilityislikelytodecrease inprofessional,scientific,andtechnicalservices;retail trade;andhealthcareinthethirdquarterof2013.

SalesandProfits ExpectationsversusPriorQuarter
65 60

57.8 Sales 53.2

CapitalExpenditures
StrongIncrease ModerateIncrease NoChange ModerateDecrease StrongDecrease 0

2.0 24.7 52.6 15.7 5.1

10 20 30 40 50 60

Index

55 50 45 40

Profits

Percent
2

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010201120122013

Center for Business and Economic Research, The University of Alabama | ABCITM

HiringandCapitalSpendingOutlooksStabilizeAfter fourconsecutivequartersofnegativeoutlook,thehiring componentindexrecovered3.2pointstoaneutral50on thethirdquarterABCIsurvey,indicatingthatthepaceof jobgrowthshouldbeaboutthesameaslastquarter. Aroundhalfofbusinessessurveyedexpecthiringtobeflat. However,apositivenet4.7percentofexecutivesplanning toincreasehiringisnegatedbythe5.5percentexpecting tocutbackstronglythisquarter.Employersinfinancial activities;transportation,information,andutilities; construction;andotherservicesarethemostlikelytoadd jobsthisquarter.Manufacturersgenerallyexpecttopost weakerjobgrowththaninsecondquarter2013.Retailers andprofessionalservicesbusinessescouldseethesharpest reductionsinhiring. Thecapitalexpendituresindexrose3.0pointsto50.7, forecastingaslightincreaseininvestmentacrossthestate. Almost27percentofpanelistsexpectspendingtoincrease and52.6percentthinkthelevelofinvestmentwillbethe sameasinthesecondquarter.Thethirdquarter2013 indexmatchesitsreadingayearago.Capitalspendingis likelytoshowthestrongestgainsinthefinance,insurance, andrealestateandtransportation,information,and utilitiessectors,followedbywholesaletrade.However, businessesinprofessional,scientific,andtechnicalservices; healthcare;andretailtradearelikelytoseecapital spendingcutagainthisquarter.

ABCITMHistory:SentimentMovesUpAgain
70 65 60 68.7

Index

55 50 45 40 35 30 Q1 Q1 Q1 Q1 Q1 Q1 31.5 Q1 Q1 Q1 Q1 Q1

52.9

Q1

2002 20032004200520062007200820092010201120122013

ManufacturingWeakens,MostIndustryOutlooksImprove Confidenceamongthestatesmanufacturersfell6.4points toamildlyoptimistic51.5,withhiringexpectedtoslowin thethirdquarter.Mostotherindustriespostedstronger readings,however.Thefinancialactivitiessectorhasthe mostrobustoutlookat61.4,upalmost9points.Firmsin construction;transportation,information,andutilities; wholesaletrade;andotherservicesaremoderately optimisticthisquarter.Althoughbetterthaninthesecond quarter,outlooksinprofessionalandhealthcareservices remaininnegativeterritoryataround46.

HiringandCapitalExpenditures
ExpectationsversusPriorQuarter
56 54 52

ABCIbyIndustry,ThirdQuarter2013
Q32013
54.0 51.5 56.4 54.8 43.6 61.4 45.7 46.5 54.1

Changefrom Q22013
2.8 -6.4 8.1 9.0 -0.3 8.8 4.2 6.0 11.7

Construction 50.7 Hiring Capital Expenditures 50.0 Manufacturing Transportation/Information/Utilities WholesaleTrade RetailTrade Finance/Insurance/RealEstate Professional/Scientific/Tech.Services
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010201120122013

Index

50 48 46 44 42

HealthcareServices AllOtherServices

IndustriesinDepth,ThirdQuarter2013
Component Index Sales Profits Hiring Capital Spending Construction 56.2 52.5 53.8 51.2 Manufac. 56.2 53.5 47.9 51.4 Transp./Info./ Utilities 61.9 54.8 54.8 56.0 Wholesale Trade 62.5 55.4 50.0 53.6 Retail Trade 51.9 48.1 38.5 44.2 Fin./Insur./ Real Estate 68.8 63.5 55.2 56.8 Prof./Sci./ Technical 50.0 47.6 43.4 42.9 Healthcare 47.2 38.9 45.8 44.4 All Other Services 57.7 53.2 54.5 51.3

Center for Business and Economic Research, The University of Alabama | ABCITM

ABCIandComponentIndexesbyArea,ThirdQuarter2013
NationalEconomy AlabamaEconomy IndustrySales IndustryProfits IndustryHiring CapitalExpenditures ABCI Alabama
50.6 55.2 57.8 53.2 50.0 50.7 52.9

MetroAreas Birmingham
52.5 52.9 59.6 57.5 52.1 52.1 54.4

Huntsville
42.1 44.6 50.4 48.6 45.4 43.2 45.7

Mobile
57.9 67.1 65.8 55.9 52.6 54.6 59.0

Montgomery
56.6 61.9 60.1 53.6 51.2 56.0 56.6

SentimentRisesinAllFourMajorMetroAreasA7.6point surgeinconfidencemadeMobilethemostoptimisticof thestateslargemetrosasareabusinessexecutiveslooked aheadtothethirdquarterof2013.ABCIMobileroseto 59.0;indexesfortheU.S.andAlabamaeconomies,sales, andhiringarethehighestofthefourmetroareas.Witha 3.3pointincreaseto56.6,ABCIMontgomeryranked second.Areaexecutivesareveryoptimisticaboutthestate economyandindustrysalesandhavethehighestmetro areaexpectationsforcapitalspendinggrowththisquarter. BirminghamHooverbusinessesaremoderately optimisticinthethirdquarter;theareasABCIrose1.7 pointsto54.4.Salesandprofitsshouldshowrelatively stronggains,andhiringandcapitalspendingareexpected topickupmodestly.Whilenotbacktopositiveterritory, businessconfidenceintheHuntsvillemetroisfinally improvingfollowingfourconsecutivequartersofdecline. Salescouldincreaseslightly,althoughhiringandcapital investmentareexpectedtodeclinemoderatelyasthe effectsofthefederalsequestercontinuetonegatively impacttheareaseconomyinthethirdquarter.

LargestFirmsMostOptimistic,butConfidenceJumps atSmallestBusinessesConfidenceamongAlabama businessesemployingfewerthan20reboundedstronglyin thirdquarter2013,rising8.2pointsto53.2.Prospectsfor sales,profits,andhiringarenowaboutthesameasforthe stateslargestfirms.Overall,largeandsmallbusinesses couldseemodestjobcreationthisquarter.Firmswith100 ormoreemployeescontinuetobethemostoptimisticwith anABCIof54.3,up2.9points.Thisistheonlysizecategory likelytoseeanincreaseincapitalinvestment. AlthoughtheoutlookforAlabamasmidsizebusinesses, (20to99employees)isup4.7pointstoamildlypositive 50.6,sentimentistheweakestofthethreefirmsize groupings.Salesareexpectedtorisemoderately,witha modestincreaseinprofits.Concernabouttheimpactof thefederalhealthinsurancemandatefor50ormore employeefirmsmaybeimpactingsentimentinthisgroup. ConfidenceintheU.S.economyregistered47.1andboth hiringandcapitalspendingarelikelytobeslightlylower thaninthesecondquarter.Delayofthemandateto2015 couldboostconfidencenextquarter.

ABCIandComponentIndexesbyFirmSize,ThirdQuarter2013
NumberofEmployees NationalEconomy AlabamaEconomy IndustrySales IndustryProfits IndustryHiring CapitalExpenditures ABCI 0to19
51.3 55.2 58.8 54.2 50.6 49.4 53.2

20to99
47.1 53.2 55.8 50.6 48.1 48.7 50.6

100andover
52.5 56.6 58.3 54.3 51.0 53.3 54.3

TheCenterforBusinessandEconomic Researchwouldliketothankthe255 Alabamabusinessexecutiveswho completedthethirdquarter2013 ABCIsurveyduringthefirsttwo weeksofJune.Thissurveymarksthe 47thconsecutivequarteroftheABCI. Weencourageyoutosignonat cber.cba.ua.edu/ABCIduringthefirst twoweeksofSeptembertorecord youropinionabouteconomic prospectsandindustryperformance lookingaheadtofourthquarter2013.

AnalysisprovidedbyCarolynTrent,SocioeconomicAnalyst,CenterforBusinessandEconomicResearch,TheUniversityofAlabama.

FormoredetailsontheAlabamaBusinessConfidenceIndex ,visit cber.cba.ua.edu/ABCI ForinformationontheCenterforBusinessandEconomicResearch,visit cber.cba.ua.edu 4 Center for Business and Economic Research, The University of Alabama | ABCITM

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