Economic sentiment rises to its highest level in over a year

Economic sentiment posted a huge increase this period, rising to its highest point in over a year. The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased by 2.3 points to 40.3, driven by a huge jump in confidence in finding a new job.

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All five of the ESI’s indicators increased during this period. Confidence in finding a new job increased the most, rising 6.2 points to 41.7. This marks this indicator’s largest increase since June 2020.

—Confidence in the overall U.S. economy increased 2.1 points to 51.2. 
—Confidence in personal finances increased 1.4 points to 59.2.
—Confidence in making a major purchase increased 1.0 points to 26.5.
—Confidence in buying a new home increased 0.7 points to 22.6.

The International Monetary Fund released its World Economic Outlook on October 22, which predicted that the U.S. economy will grow by 2.8% in 2024 and 2.2% in 2025. These predictions are 0.2 and 0.3 percentage points higher than the IMF previously projected in July 2024, respectively. 

Neel Kashkari, President of the Minneapolis Fed, stated in a speech to the Central Bank of the Argentine Republic that further rate cuts are likely to occur in the U.S. Kashkari said, “As of right now, it appears likely that further modest reductions in our policy rate will be appropriate in the coming quarters to achieve both sides of our mandate.” Kashkari also pointed to other positive economic metrics, affirming that the U.S. is still on target to its goal of reducing inflation to 2% and that job growth remains strong.

The U.S. Commerce Department reported that retail sales rose 0.4% from August to September and 1.7% from September 2023. This represents this indicator’s third straight increase and points to continued, robust consumer spending in the U.S.

Meanwhile, the U.S. Bureau of Labor Statistics released the September Consumer Price Index (CPI), showing that core inflation—the index excluding volatile food and energy costs—rose 0.3% in September and 3.3% over the last year. Both readings were 0.1 percentage points higher than economists’ forecasts. Despite this reading, Chicago Fed President Austan Goolsbee stated, “The overall trend is what’s important, not the day to day fluctuations…The overall trend over 12, 18 months is clearly that inflation has come down a lot, and the job market has cooled to a level which is around where we think full employment is.”

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The ESI’s three-day moving average began this two-week stretch at a low of 37.3 on October 9. It then rose up to 39.5 on October 11 before falling to 37.7 on October 14. The three-day moving average then rose up to 41.5 on October 16 and decreased back down to 39.9 on October 18 before rising to a high of 42.5 on October 21. It then fell back down to 41.3 on October 22 to close out the session.

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The next release of the ESI will be on Wednesday, November 6, 2024.

Economic sentiment dips slightly at the start of Q4

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) decreased by 0.3 points to 38.0, marking a slight dip in overall economic confidence over the past two weeks.

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Two of the ESI’s five indicators decreased during this period. Confidence in finding a new job fell the most, dropping 3.0 points to 35.5.

—Confidence in buying a new home decreased 0.3 points to 21.9.

—Confidence in personal finances remained flat at 57.8.

—Confidence in the overall U.S. economy increased 0.4 points to 49.1.

—Confidence in making a major purchase increased 1.5 points to 25.5.

The September Jobs Report from the Bureau of Labor Statistics revealed that nonfarm payroll employment increased by 254,000 during the month, the largest job gain in six months. The unemployment rate also fell to 4.1%, and July and August data were revised upward by 72,000 combined. These data came on the heels of a substantial 50 basis point cut in interest rates in September, pointing to greater resiliency in the macroeconomy than initially anticipated.

Data from the Bureau of Economic Analysis showed that the core personal consumption expenditures index (core PCE), which excludes volatile food and energy prices, increased slightly in August, rising 0.1 percentage points to 2.7% year-over-year. This data reflects continued progress toward steadying inflation near the Federal Reserve’s 2% target.

Revised data from the Bureau of Economic Analysis shed new light on the strength of the economic recovery following the pandemic. Updated estimates of the U.S. gross domestic product (GDP) show that the economy grew faster in 2021, 2022, and early 2023 than previously reported. Notably, the revised data indicates that GDP grew slightly in the second quarter of 2022, contradicting earlier reports of two consecutive quarters of negative growth, which would have potentially suggested a recession.

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The ESI’s three-day moving average began this two-week stretch at a high of 42.1 on September 25 before falling to 38.1 on September 28. It then fluctuated before dropping to a low of 36.3 on October 5. The three-day moving average then rose up to 38.2 to close out the session on October 8.

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The next release of the ESI will be on Wednesday, October 23, 2024.

Economic sentiment reaches highest point in over a year following the first interest rate cut since March 2020

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased by 1.6 points to 38.3, a notable improvement in confidence over the past two weeks following the Federal Reserve’s decision to cut interest rates by 50 basis points at its September meeting.

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Four of the ESI’s five indicators increased during this period. Confidence in the overall U.S. economy saw the largest gain, rising 3.6 points to 48.7.

—Confidence in finding a new job increased 3.0 points to 38.5.

—Confidence in personal finances increased 1.6 points to 57.8.

—Confidence in buying a new home increased 0.3 points to 22.2.

—Confidence in making a major purchase decreased 0.7 points to 24.0.

The Federal Reserve cut interest rates by 50 basis points to between 4.75 percent and 5 percent, the first rate cut since March 2020. This move came amidst slowing job growth and a steadying rate of inflation. In its Federal Open Markets Committee statement, the Fed stated that this move “seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.” Fed Chair Jerome Powell stated similarly, emphasizing that the Fed is “trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with this inflation.”

Major stock indexes surged on Thursday, September 19 following the Fed’s announcement to cut rates, with the Dow Jones Industrial Average closing 1.3 percent higher than the previous day and the S&P 500 growing 1.7 percent. These surges caused both the Dow and the S&P to close at record highs.

The Bureau of Labor Statistics released its August Consumer Price Index (CPI) data, showing that the Index excluding volatile food and energy costs rose 0.3 percent and 3.2 percent on an annual basis. Meanwhile, all items increased 2.5 percent on an annual basis, down from 2.9 percent in July. AP reported that this is the fifth consecutive annual drop and the lowest measure since 2021.

Meanwhile, the Commerce Department reported that August retail sales were up 0.1 percent from July and 2.1 percent year over year. This data shows that consumers are still spending despite persistent inflation, though the August pace is much slower than July’s upwardly revised 1.1 percent increase.

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The ESI’s three-day moving average began this two-week stretch at 35.5 before rising to 37.4 on September 17. It then dipped slightly on September 18 before rising again, closing out the period at 42.1 on September 24.

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The next release of the ESI will be on Wednesday, October 9, 2024.

Economic sentiment increases slightly ahead of the September Fed meeting

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased by 0.6 points to 36.7, a slight improvement in confidence over the past two weeks.

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Four of the ESI’s five indicators increased during this period. Confidence in the overall U.S. economy saw the largest gain, rising 1.5 points to 45.1. 

—Confidence in finding a new job decreased by 0.8 points to 35.5.

—Confidence in personal finances increased by 0.4 points to 56.2.

—Confidence in buying a new home increased by 0.8 points to 21.9.

—Confidence in making a major purchase increased by 1.1 points to 24.7.

The Federal Reserve’s preferred inflation metric held steady in July with personal consumption expenditures, excluding volatile food and energy prices, rising 2.6% year-over-year, in-line with the previous two months. The steadying rate of inflation combined with slowing job creation has bolstered expectations for the first interest rate cut in over a year next week at the Fed’s September meeting.

The Bureau of Economic Analysis reported that the U.S. economy grew faster than initially thought in the second quarter of 2024, at an annualized rate of 3.0%. This growth was primarily driven by an upturn in inventory investment and strong consumer spending, which remain crucial forces in sustaining the broader economy despite inflationary pressures.

The September Jobs Report from the Bureau of Labor Statistics revealed that nonfarm payroll employment increased by 142,000 in August, which was less than expected and below the average monthly gain seen over the previous year. Jobs gained in June and July were revised down, showing that job creation has slowed. However, the unemployment rate fell to 4.2% signaling the labor market may be remaining resilient​.

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The ESI’s three-day moving average began this two-week stretch at 37.1 before slipping to 35.8 on August 31. It rebounded in early September, peaking at 39.5 on September 3. After that, it declined again, closing out the period at 35.2 on September 10.

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The next release of the ESI will be on Wednesday, September 25, 2024.

Economic sentiment declines alongside a decrease in overall economic confidence

The Penta-CivicScience Economic Sentiment Index (ESI) decreased by 1.1 points to 36.1, reflecting growing concerns amid recent economic developments.

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Four of the ESI’s five indicators decreased over the past two weeks. Confidence in the overall U.S. economy decreased the most, falling 2.9 points to 43.6.

—Confidence in making a major purchase decreased 1.7 points to 23.6.

—Confidence in personal finances decreased 1.1 points to 55.8.

—Confidence in buying a new home decreased 0.2 points to 21.3.

—Confidence in finding a new job increased 0.5 points to 36.3.

At the Federal Reserve’s recent Jackson Hole conference, Chair Jerome Powell signaled that the “time has come” for interest rate cuts as inflation shows signs of easing. Powell emphasized the Fed’s commitment to achieving a soft landing for the U.S. economy, balancing inflation control with maintaining a strong labor market. His comments have led to increased speculation about the Fed’s policy direction and have caused notable movements in financial markets​.

The Bureau of Labor Statistics reported a significant revision to jobs data, reporting that 818,000 fewer jobs were created between March 2022 and March 2023 than initially estimated. This substantial adjustment has raised alarms about the strength of the labor market, particularly as the July Jobs Report showed only 114,000 new jobs, far below expectations. The revisions and weak job growth suggest a potentially slower economic recovery than previously anticipated.

Meanwhile, retail sales in July provided a brighter spot in the economic landscape, with a 1% increase from June and up 2.7% year-over-year. This data indicates that consumer spending remains robust. This resilience in consumer spending continues to support economic growth despite persistent headwinds such as stubborn inflation and slowing jobs growth.

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The ESI’s three-day moving average began this two-week stretch at 38.3 on August 14, then decreased steadily to 34.0 on August 22. It then rose back up to 38.0 on August 25 before decreasing to 36.0 on August 27 to close out the session.

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The next release of the ESI will be on Wednesday, September 11, 2024.