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Business Confidence Increases, Expectations Up
WEST CHESTER, Pa. (12/31/13)--A measure of business confidence will end the year at an historical high, according to a report released Monday.
 
A four-week moving average of Moody's business confidence index finished the week ending Dec. 27 at 38.4--up by 0.7 points on a weekly basis and higher by 11.6 points since Nov. 15 (Economy.com Dec. 30).
 
Driving the increase in confidence is optimism, with close to three-quarters of respondents expecting the global economy to improve next year. Four-week moving averages of indexes measuring present conditions and half-year expectations were up to 35.5 and 59.3, with the latter having risen steadily since the week ending Nov. 15, when it was at 47.1.
 
Moody's said the positive outlook is due to the recent budget deal and record stock market highs, and that optimism is informing businesses' plans to hire. Half of the survey's respondents said they plan on adding staff, with only a "very small percentage" planning on shedding workers from their payrolls.
 
The firm also said that survey respondents are "investing strongly" in equipment and software, contradicting reports showing capital expenditures having been meager in recent months.
 
More than 50% of responses to the nine survey questions were positive, with only 10% of answers negative--an average of negative responses over the survey's 11-year history is closer to 33%. Moody's said that confidence--the difference between the percentage of positive and negative responses to the survey questions--"has never been stronger."
 
The weekly index was at 36.5% on a global scale. That measure in the U.S. was at about 38%, with the domestic four-week moving average at around 40%.
 
Moody's said that businesses are primarily worried about regulatory and legal issues, with almost 40% of respondents citing them as a primary concern.
 
The firm says that when the index shows less than 10% of responses as net positive, the economy is in recession, while positive readings between 20% and 30% indicate an economy expanding at potential. The all-time low was 30% net negative, in late December 2008 and the most recent high was just less than 40%, in early March 2011.


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