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.

Economic sentiment holds steady after last period’s large increase

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) remained flat at 37.2 following last period’s large increase.

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Three of the ESI’s five indicators increased over the past two weeks. Confidence in buying a new home increased the most, rising 1.6 points to 21.3. 

—Confidence in making a major purchase increased 1.3 points to 25.3. 

—Confidence in personal finances increased 0.9 points to 56.9.

—Confidence in the overall U.S. economy decreased 0.2 points to 46.5.

—Confidence in finding a new job decreased 4.0 points to 35.8.

The July Jobs Report from the Bureau of Labor Statistics revealed total nonfarm payroll increased by 114,000. This report came in much lower than economists’ predictions of 185,000. Meanwhile, the unemployment rate rose to 4.3%, the highest level since October 2021.

Federal Reserve officials again left interest rates unchanged at between 5.25 percent and 5.5 percent. Fed Chair Jerome Powell stated that rate cuts “could be on the table” in September, but that “we’re not quite at the point” to do this. In its Federal Open Markets Committee statement, the Fed stated that “job gains have moderated, and the unemployment rate has moved up but remains low. Inflation has eased over the past year but remains somewhat elevated. In recent months, there has been some further progress toward the Committee’s 2 percent inflation objective.”

Fear that the Fed may have waited too long to cut interest rates following the July Jobs Report helped contribute to a global sell-off of stocks. On August 5, the S&P 500 dropped 3%, the Dow fell 2.6%, the U.K.’s FTSE 100 index declined 2%, and Japan’s benchmark Nikkei 225 index plummeted 12.4%.

Freddie Mac reported that mortgage rates fell to their lowest level in 15 months. Specifically, the average rate on 30-year mortgages declined to 6.47%. Sam Khater, Freddie Mac’s Chief Economist, stated in a press release that this decline follows “the likely overreaction to a less than favorable employment report and financial market turbulence for an economy that remains on solid footing.” 

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The ESI’s three-day moving average began this two-week period at 37.8 on July 31. It then oscillated before falling to a low of 34.8 on August 5. The three-day moving average then rose back up to a peak of 39.4 on August 9, then decreased back down to 35.7 on August 11 before rising back up to 39.0 on August 13 to close out the session.

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The next release of the ESI will be Wednesday, August 28, 2024.