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Delta and economic disruptions dent confidence among Mass. companies

August saw biggest drop in state business confidence index since the pandemic began

After a resurgence earlier this summer, business confidence dipped in August on spread of the COVID Delta variant and concerns about hiring and supply chain disruptions.Christiana Botic for The Boston Globe

What a difference a month makes.

In July, business confidence levels tracked by Associated Industries of Massachusetts reached a three-year high as employers hoped an end to the COVID-19 pandemic was just around the corner.

Then came the Delta variant: COVID case counts shot up again, causing many companies to put off their return-to-office plans and implement new vaccination requirements for workers.

That’s one big reason the AIM Business Confidence index shed 3.6 points in August, its largest drop since March 2020, according to a report Tuesday. The index fell to 62.0, keeping it squarely in positive territory — the breakpoint between an overall negative mood and an upbeat one is 50 — but the trajectory changed significantly, for the worse. (About 130 employers, ranging in size from one- and two-person firms to billion-dollar companies, responded to the latest poll.)

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“There’s no question that concern about COVID is giving employers pause,” said Chris Geehern, executive vice president at AIM. “The uncertainties swirling around employers have kind of slowed things down a bit.”

The uncertainties extend beyond public health concerns. They also include significant supply chain disruptions and the struggle to hire enough workers. One respondent remarked that costs have shot up because parts need to be imported to the United States by plane, as it’s impossible to get supplies on a container ship. Another said they are not bidding on potentially lucrative contracts because they don’t have the staff necessary to fulfill them.

And then there are the persistent headlines about office delays: Big Boston-area employers that have publicly announced they would keep most workers remote for longer than anticipated range from Google to John Hancock to Dell Technologies.

The AIM report comes days after the National Federation of Independent Business reported poll results that showed half of small-business owners reported they had job openings they could not fill, a record high. The primary factor: Too few qualified applicants.

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Chris Carlozzi, state director with the federation, said he’s seeing this dynamic play out in Massachusetts. He has one member, a small construction company on Cape Cod, that ran a want ad in the local paper for five months and didn’t get one applicant. No sector of the economy is immune, he said.

Carlozzi worries about restaurants and brick-and-mortar stores in particular; subpar service in those places might chase away customers for good.

“You don’t want the consumer experience to be bad at a time when you’re trying to do everything possible to get people back, to shop and dine,” Carlozzi said. “It really causes problems with the recovery if businesses are saying ‘Come back, come shop, and come dine’ and then you wait in lines to be served as a consumer.”

Jon Hurst is hearing similar concerns from members of the group he leads, the Retailers Association of Massachusetts. Retailers are also worried about getting enough supplies to stock their shelves for the all-important fourth quarter of the year. Inadequate inventory could send customers to the Internet again. And this time, they might not come back.

“A lot of them are on edge about when things will correct,” Hurst said. “There are real issues getting things from China. I don’t care if you make a car, an appliance, or clothing . . . I view this fall, clear through Christmas, as absolutely critical.”

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Jon Chesto can be reached at jon.chesto@globe.com. Follow him on Twitter @jonchesto.