Economic sentiment falls for third consecutive reading

Economic sentiment decreased over the last two weeks, reaching its lowest point so far in 2024. The Penta-CivicScience Economic Sentiment Index (ESI) fell 0.4 points to 32.6.

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Three of the ESI’s five indicators decreased over the past two weeks. Confidence in finding a new job decreased the most, falling 2.3 points to 33.5—the indicator’s lowest point in over a year.

—Confidence in making a major purchase decreased 1.1 points to 22.1.

—Confidence in buying a new home decreased 0.3 points to 18.5.

—Confidence in the overall U.S. economy increased 0.3 points to 35.1.

—Confidence in personal finances increased 1.1 points to 53.8.

While the job market remains resilient, with generally strong job growth and a relatively steady unemployment rate of 3.9%, LinkedIn reported a 14% increase in the number of applications per open role on the platform between November 2023 and March 2024. Additionally, workers’ expectations of forthcoming job losses are elevated: 15.1% of respondents surveyed by the New York Fed in its April 2024 Survey of Consumer Expectations perceived a probability of losing their job in the next twelve months—a slight decline from March, but the second-highest probability since October 2020.

Research from the New York Fed also shows that, over the past year, delinquency rates on credit card balances have risen past pre-pandemic levels to 8.9% and household debt climbed to $17.69 trillion. Credit card delinquencies disproportionately come from borrowers who have maxed-out their balances, and the share of maxed-out borrowers has been increasing from pandemic lows—highlighting the potential for delinquencies to continue growing.

The median U.S. home prices hit an all-time high in April, rising 6.2% year-over-year to $433,558. Meanwhile, new listings remain roughly 20% below pre-pandemic levels, in large part because many homeowners continue to feel “locked in” by the low mortgage rates that occurred during the pandemic.

The U.S. Department of Labor Statistics reported that the Consumer Price Index (CPI) increased by 0.3 percent in April and rose 3.4 percent on an annual basis. Core CPI inflation increased as well, rising 0.3 percent in April. The release of this CPI data comes as Fed Chair Jerome Powell, speaking at the Foreign Bankers’ Association in Amsterdam on Tuesday, reiterated the need to hold interest rates high given persistent inflation. Powell stated, “these [inflation readings] were higher than I think anybody expected… What that has told us is that we’ll need to be patient and let restrictive policy do its work.”

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The ESI’s three-day moving average began this two-week stretch at 32.4 on May 8. It rose to 32.8 on May 9, then fell to a low of 30.9 on May 13. The three-day moving average then trended upward to a high of 34.9 on May 20 before falling to 33.4 on May 21 to close out the session.

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The next release of the ESI will be Wednesday, June 5, 2024.

Economic sentiment continues its downward trend to start May

Economic sentiment decreased over the last two weeks, continuing the ongoing downward trend observed since the start of the year. The Penta-CivicScience Economic Sentiment Index (ESI) decreased 1.4 points over the last two weeks, to 33.0.

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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 3.9 points to 34.8. This marks this indicator’s largest single-period decrease in over a year.

—Confidence in personal finances decreased 1.8 points to 52.7.

—Confidence in finding a new job decreased 1.2 points to 35.8.

—Confidence in buying a new home decreased 0.5 points to 18.8.

—Confidence in making a major purchase increased 0.5 points to 23.2.

The Commerce Department reported that the U.S. economy grew by an annualized rate of 1.6 percent in the first quarter of 2024. This represents a sharp slowdown in growth compared to the fourth quarter of 2023, where the economy grew by an annualized rate of 3.4 percent. Additionally, this report was much lower than the growth rate of 2.4 percent that economists were predicting. The Bureau of Economic Analysis stated that the “deceleration in real GDP in the first quarter primarily reflected decelerations in consumer spending, exports, and state and local government spending and a downturn in federal government spending.”

Despite this bleak report, U.S. Treasury Secretary Janet Yellen continued to reaffirm the U.S.’s economic outlook. In an interview with Reuters Next, Yellen stated, “The U.S. economy continues to perform very, very well.” Yellen also implied that the data may be revised upwards when more data becomes available.

The U.S. Bureau of Labor Statistics reported that total non-farm payrolls increased by 175,000 in April while the unemployment rate increased 0.1 percentage points to 3.9 percent. This was well below the predictions of economists’ who had forecasted an increase of 240,000 jobs.

On May 1, the Federal Reserve issued its Federal Open Market Committee statement where it decided to leave interest rates unchanged at between 5.25 percent and 5.5 percent. The Fed’s statement read, “recent indicators suggest that economic activity has continued to expand at a solid pace” but that “there has been a lack of further progress toward the Committee’s 2 percent inflation objective.”

Media attention has begun to report on the possibility of the U.S. entering a stagflationary period. Fed Chair Jerome Powell last week stated that he doesn’t “really understand where talk of a stagflation scenario is coming from.” However, JPMorgan Chase CEO Jamie Dimon was recently a little less optimistic, stating, “You should be worried about (the possibility of stagflation).”

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The ESI’s three-day moving average began this two-week stretch at 34.1 on April 24. It decreased to 32.2 on April 27, then oscillated between increasing and decreasing until it reached a peak of 34.5 on May 2. The three-day moving average then decreased to a low of 31.9 on May 6 before slightly rising to 32.2 on May 7 to close out the session.

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The next release of the ESI will be Wednesday, May 22, 2024.

Economic sentiment slightly increases following last period’s large decrease

Economic sentiment slightly increased over the last two weeks following last period’s large decrease. The Penta-CivicScience Economic Sentiment Index (ESI) rose 0.3 points over the last two weeks, to 34.4.

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Three of the ESI’s five indicators increased over the past two weeks. Confidence in the overall U.S. economy increased the most, rising 2.4 points to 38.7.

—Confidence in finding a new job increased 1.1 points to 37.0.

—Confidence in personal finances increased 0.7 points to 54.5.

—Confidence in buying a new home decreased 2.1 points to 19.3.

—Confidence in making a major purchase decreased 0.5 points to 22.7.

The International Monetary Fund (IMF) increased its growth estimate for the U.S. economy to 2.7% in 2024, an upwards adjustment of 0.6 percentage points from the previous estimate released in January. This adjustment highlights the surprising strength of the U.S. economy. IMF chief economist Pierre-Olivier Gourinchas wrote, “The strong recent performance of the United States reflects robust productivity and employment growth, but also strong demand in an economy that remains overheated. This calls for a cautious and gradual approach to (monetary) easing by the Federal Reserve.”

In a question-and-answer session on April 16, Fed Chair Jerome Powell continued to discuss the possibility of rate cuts amid persistent inflation. Powell stated, “The recent data have clearly not given us greater confidence and instead indicate that it is likely to take longer than expected to achieve that confidence.” This statement followed the release of March’s consumer price index, which showed that inflation accelerated faster than economists had previously predicted.

The Federal Reserve’s “Beige Book” survey, which polled business across the Fed’s 12 districts over the six weeks prior to April 8, found that economic activity “expanded slightly,” with ten of the Federal Reserve’s 12 districts having “experienced either slight or modest economic growth—up from eight in the previous report, while the other two reported no changes in activity.” Additionally, the survey found that increases in prices were “modest, on average, running at about the same pace as in the last report” and that employment increased at “a slight pace overall.”

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The ESI’s three-day moving average began this two-week stretch at 34.7 on April 10. It then oscillated slightly before rising to a peak of 35.7 on April 14. The three-day moving average then fell to a low of 32.6 before increasing back up to 35.5 on April 21. It fell to 34.4 on April 23 to close out the session. 

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The next release of the ESI will be Wednesday, May 8, 2024.

Economic sentiment posts its largest single-period decrease in over a year

Economic sentiment decreased over the last two weeks, posting its largest single-period decrease in over a year. The Penta-CivicScience Economic Sentiment Index (ESI) dropped 1.8 points over the last two weeks to 34.1.

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Four 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 2.7 points to 35.9 and 36.3, respectively. This decline marked the largest single-period decrease for confidence in finding a new job in over a year, and the largest single-period decrease for confidence in the overall U.S. economy since May 2023.

—Confidence in personal finances decreased 2.2 points to 53.8.

—Confidence in making a major purchase decreased 1.6 points to 23.2.

—Confidence in buying a new home increased 0.4 points to 21.4.

The U.S. Bureau of Labor Statistics released its March consumer price index (CPI) on April 10. The Bureau reported that the index rose 0.4 percent in March month-over-month and rose 3.8 percent on an annual basis. The March index accelerated at a faster rate than economists were predicting, highlighting the continued stickiness of inflation.

Amid rising inflation, conversation over the past two weeks has continued to speculate if and when the Federal Reserve will cut rates. In a conference at Stanford University, Fed Chair  Jerome Powell, reiterated the need to continue watching inflation in order “to let the incoming data guide our decisions on policy.” Minneapolis Federal Reserve President Neel Kashkari even raised the prospect of no rate cuts in 2024 when he stated, “if we continue to see inflation moving sideways, then that would make me question whether we need to do those rate cuts at all.”

The Wall Street Journal reported that, in contrast to the three quarter-point cuts signaled by the Fed in March, traders are now anticipating one or two, or possibly even zero, rate cuts for 2024.

The U.S. Bureau of Labor Statistics reported that the U.S. economy added 303,000 jobs in the month of March, blowing past economists’ predictions of 200,000 new jobs. Meanwhile, the unemployment rate decreased slightly from February, down 0.1 percentage point from 3.9 percent to 3.8 percent. The growth in jobs was strong across the economy due to gains in many industries including increases of 72,000 jobs in healthcare, 71,000 jobs in government, and 39,000 jobs in construction.

The Commerce Department revised its measure of fourth quarter 2023 gross domestic product (GDP), stating that the economy grew at an annualized pace of 3.4 percent. This measure was revised slightly upwards from the Commerce Departments’ first and second estimates of 3.3 and 3.2 percent, respectively. Despite this upward revision, GDP growth from 2023 stayed at 2.5 percent.

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The ESI’s three-day moving average began this two-week stretch at 36.0 on March 27. It then decreased to 33.9 on March 31. The three-day moving average then oscillated between increasing and decreasing, rising to 35.4 on April 3, before continuing to oscillate and eventually fall to 32.8 on April 9 to close out the session.

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The next release of the ESI will be Wednesday, April 24, 2024.

Economic sentiment posts its largest increase in weeks

Economic sentiment increased over the last two weeks, rising for the first time since mid-February and registering its largest increase since mid-January. The Penta-CivicScience Economic Sentiment Index (ESI) increased 1.4 points over the last two weeks to 35.9.

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Four of the ESI’s five indicators increased over the past two weeks. Confidence in personal finances increased 2.8 points, rising to 56.0.

—Confidence in the overall U.S. economy increased 2.4 points to 39.0.

—Confidence in finding a new job increased 2.2 points to 38.6.

—Confidence in making a major purchase increased 0.7 points to 24.8.

—Confidence in buying a new home decreased 1.5 points to 21.0.

The U.S. Federal Reserve held interest rates steady at its meeting on Wednesday March 20. This marked the fifth consecutive meeting that the Fed maintained the current rate. In a statement, the Federal Open Market Committee stated that they do “not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

The Fed also released its quarterly economic projections on March 20. The “core” inflation measures—which measure prices excluding volatile food and energy prices—were revised to be 0.2 percent higher than what was projected in December. Officials also updated their projections for 2024 economic growth, forecasting growth of 2.1 percent in 2024, a 0.7 percent increase from 1.4 percent predicted in December 2023. The majority of Federal Officials signaled that they expect three cuts to the federal funds rate in 2024. However, officials signaled that they anticipate fewer cuts in 2025 and 2026.

Stocks surged following the Fed’s meeting, with the S&P 500, the Dow Jones Industrial Average, and the Nasdaq all closing at record highs on Wednesday, March 20. Barron’s reported that this marked the first time the three major indexes closed above their record values since 2021. This surge continued, with stocks again closing above record highs the following day on March 21, with the Dow ending the day just shy of $40,000.

The Commerce Department reported that retail sales increased by 0.6 percent in February. Meanwhile, January sales were revised from a 0.8 percent drop to a 1.1 percent decrease. This data does not take into account inflation. Retail sales, excluding sales from gas stations and auto dealers, increased by 0.3 percent.

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The ESI’s three-day moving average began this two-week stretch at 35.2 on March 13 and then rose to a peak of 36.9 on March 15. It then oscillated between increasing and decreasing before falling to a low of 34.0 on March 24. The three-day moving average then climbed to 35.9 to close out the session on March 26.

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The next release of the ESI will be Wednesday, April 10, 2024.