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.

Click to view image.

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.

Click to view image.

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.

Click to view image.

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.

Click to view image.

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.” 

Click here to view image.

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.

Click here to view image.

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

A record-breaking two weeks for economic sentiment

Economic sentiment posted a huge increase over the last two weeks, rising to its highest point in over a year. The Penta-CivicScience Economic Sentiment Index (ESI) rose 2.7 points to 37.2. Notably, confidence in the overall U.S. economy skyrocketed 8.0 points to 46.7—the biggest single-reading jump of any indicator in the ESI’s 11-year history.

Click to view image.

Four of the ESI’s five indicators, including confidence in the overall U.S. economy, increased over the past two weeks.

—Confidence in finding a new job increased 4.3 points to 39.8.

—Confidence in making a major purchase increased 1.0 points to 24.0.

—Confidence in buying a new home increased 0.6 points to 19.7.

—Confidence in personal finances decreased 0.1 points to 56.0.

The Bureau of Economic Analysis reported that U.S. real GDP increased at an annual rate of 2.8% in the second quarter of 2024. This increase is double the 1.4% increase realized in the first quarter of 2024 and was well above economists’ predictions of 1.9%. Though this data is preliminary and will be revised, it does represent the continued strength of the U.S. economy in the face of economic headwinds such as stubborn inflation and high unemployment.

Per the BEA, this increase in real GDP can be attributed to increases in consumer spending, private inventory investment, and nonresidential fixed investment. Specifically, consumer spending, which makes up over two-thirds of the economy, increased at an annual rate of 2.3% in the second quarter of 2024. This represents an increase from 1.5% reported in the first quarter of 2024.

The Bureau of Labor Statistics released its Job Openings and Labor Turnover Summary which reported that the number of job openings in June remained relatively unchanged from May, with 8.1 million available positions this month. Hiring decreased by 0.2 percentage points from May to June, with 314,00 less hires this month compared to last. Total separations also decreased by 0.2 percentage points, with 302,000 fewer separations month-over-month.

Economists are predicting that the Fed will likely hold interest rates steady at its two-day meeting that began on Tuesday, July 30 and likely opt to decrease rates at its September meeting. However, some economists are questioning whether waiting until September is too late given the high unemployment rate. The June jobs report showed that the unemployment rate increased to 4.1 percent, the metric’s highest level since November 2021.

Click to view image.

The ESI’s three-day moving average began this two-week stretch at 33.5 on July 17. It then decreased to a low of 32.6 on July 18 before climbing to 37.4 on July 24. The three-day moving average then fell slightly before rising back up to a peak of 41.2 on July 27. Finally, it decreased to 36.9 on July 30 to close out the session. 

Click to view image.

The next release of the ESI will be Wednesday, August 14, 2024.

Economic sentiment decreases for the first time since late May

Economic sentiment decreased over the past two weeks, breaking its string of increases observed over the past three periods. The Penta-CivicScience Economic Sentiment Index (ESI) fell 0.8 points to 34.5.

Click to view image.

Three of the ESI’s five indicators decreased over the past two weeks. Confidence in finding a new job and confidence in the overall U.S. economy decreased the most, both falling 2.6 points to 35.5 and 38.7, respectively.

—Confidence in making a major purchase decreased 1.1 points to 23.0.

—Confidence in buying a new home increased 0.8 points to 19.1.

—Confidence in personal finances increased 1.4 points to 56.1.

The June jobs report showed the economy added 206,000 jobs, coming in slightly higher than economists’ predictions of 190,000. Meanwhile, the U.S. Department of Labor Statistics reported that the unemployment rate increased by 0.1 percentage points to 4.1 percent. This increase represents the metric’s highest level since November 2021.

Additionally, the U.S. Bureau of Labor Statistics revised total nonfarm payroll employment from April and May down a combined 111,000 jobs. J.P. Morgan reported that this revision decreased the three-month average payroll gains to 177,000, marking the slowest pace since January 2021.

In his recent testimony before the House Financial Services Committee, Fed Chair Jerome Powell indicated that rate cuts may come before inflation decreases to 2%. Powell stated “We’re not just an inflation-targeting central bank” and that the Fed is also watching other economic indicators, specifically the slowing labor market, when considering cuts. Powell warned that rate cuts that come “too late or too little could unduly weaken economic activity and employment.”

The U.S. Bureau of Labor Statistics released its June Consumer Price Index (CPI) data, showing that the Index excluding food and energy costs also rose 0.1% in June and 3.3% on an annual basis. The Bureau stated that this marks the core rate’s smallest 12-month increase since April 2021. Meanwhile, the all items index increased 3.0% over the last 12 months.

Click to view image.

The ESI’s three-day moving average began this two-week stretch at 35.5 on July 3. It then increased to a peak of 36.2 on July 4 before sharply decreasing to 33.2 on July 6. The three-day moving average then rose back up to 34.5 on July 7 before falling to a low of 32.8 on July 8. It then increased back up to 36.0 on July 9, then oscillated slightly before falling to 33.2 on July 14. The moving average then rose back up to 34.8 on July 16 to close out the session.

Click to view image.

The next release of the ESI will be Wednesday, July 31, 2024.

Economic sentiment continues upswing into July 4 holiday weekend

Economic sentiment increased again over the past two weeks, reaching its highest level since mid-March. The Penta-CivicScience Economic Sentiment Index (ESI) rose 0.6 points to 35.3.

Click to view image.

Two of the ESI’s five indicators increased over the past two weeks. Confidence in the overall U.S. economy increased the most, rising 2.5 points to 41.3.

—Confidence in making a major purchase increased 1.6 points to 24.1.

—Confidence in personal finances remained unchanged at 54.7.

—Confidence in finding a new job decreased 0.2 points to 38.1.

—Confidence in buying a new home decreased 1.1 points to 18.3.

The Bureau of Labor Statistics reported on May 31 that personal consumption expenditures, excluding volatile food and energy prices, increased by seasonally adjusted 0.1% in May and are up 2.6% year-over-year. The latter reading is 0.2 percentage points lower than the year-over-year reading from April and represents the lowest reading since March 2021.

Despite this positive reading from the Fed’s preferred inflation metric, economists remain skeptical of a potential rate cut at the Fed’s next meeting on July 31 given the Fed’s continued emphasis on getting inflation down to 2%. Ryan Sweet, chief US economist at Oxford Economics, told the Financial Times that while the reading was “encouraging news” the Fed was not yet “anywhere near ready to declare victory.”

The Commerce Department revised its GDP growth estimate for the first quarter of 2024 to an annualized pace of 1.4%. This represents a slight upgrade from its previous estimate of 1.3% but still marks the GDP’s slowest quarterly growth since spring 2022 and a sharp change from the growth rate of 3.4% experienced in the last quarter of 2023.

Click to view image.

The ESI’s three-day moving average began this two-week stretch at 36.2 on June 19. It then decreased slightly before rising to a peak of 36.4 on June 21. The three-day moving average then decreased to a low of 34.4 on June 23 before rising back up to 35.3 on June 26. The average then heavily oscillated between increasing and decreasing before rising back up slightly to 35.5 on July 2 to close out the session.

Click to view image.

The next release of the ESI will be Wednesday, July 17, 2024.