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.

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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.

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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.

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

Economic sentiment continues its June rally

Economic sentiment increased again over the past two weeks, continuing its rally from the beginning of the month. The Penta-CivicScience Economic Sentiment Index (ESI) rose 1.2 points to 34.7.

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All of the ESI’s five indicators increased over the past two weeks. Confidence in the overall U.S. economy increased the most, rising 2.7 points to 38.8. This marks this indicator’s largest single-reading increase since January.

—Confidence in finding a new job increased 1.9 points to 38.3.

—Confidence in buying a new home increased 1.0 points to 19.4.

—Confidence in making a major purchase increased 0.3 points to 22.5.

—Confidence in personal finances increased 0.2 points to 54.7.

The May jobs report showed the economy added 272,000 jobs in the month, blowing past 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 percent. This is the first time that this metric has breached the 4 percent threshold since January 2022.

Meanwhile, the U.S. Department of Labor Statistics released the May Consumer Price Index (CPI) data, showing that the Index remained unchanged in May and rose 3.3 percent on an annual basis. Meanwhile, Core CPI inflation increased slightly, rising 0.2 percent in May.

On the heels of the CPI data, the Federal Reserve announced it again decided to leave interest rates unchanged at between 5.25 percent and 5.5 percent. This represents the 11th consecutive month the Fed has left the rates unchanged. In its Federal Open Markets Committee statement, the Fed stated that “Recent indicators suggest that economic activity has continued to expand at a solid pace” and “Inflation has eased over the past year but remains elevated.” The Fed again reiterated its goal of reducing inflation to 2 percent.

The World Bank upgraded its prediction for global economic growth in 2024, forecasting that it will expand 2.6 percent this year. This represents an increase of 0.2 percentage points from its prediction in January of this year. The World Bank’s Chief Economist, Indermit Gill, credited part of this revision to the U.S. economy, stating, “Globally, overall things are better today than they were just four or five months ago. A big part of this has to do with the resilience of the U.S. economy.”

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The ESI’s three-day moving average began this two-week stretch at 32.3 on June 5. It then decreased to a low of 31.9 on June 6 before rising to a peak of 36.8 on June 10. The three-day moving average then decreased to 34.1 on June 14 before rising back up to 36.2 on June 17. Finally, the moving average closed out the session by falling to 35.3 on June 18.

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The next release of the ESI will be Wednesday, July 3, 2024.

Economic sentiment sees largest increase since March

Economic sentiment increased over the last two weeks, breaking the downward trend observed over the last three cycles. The Penta-CivicScience Economic Sentiment Index (ESI) rose 0.9 points to 33.5.

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Four of the ESI’s five indicators increased over the past two weeks. Confidence in finding a new job increased the most, rising 2.9 points to 36.4.

—Confidence in the overall U.S. economy increased 1.0 points to 36.1.

—Confidence in personal finances increased 0.7 points to 54.5.

—Confidence in making a major purchase increased 0.1 points to 22.2.

—Confidence in buying a new home decreased 0.1 points to 18.4.

After an increase in unemployment benefits claims in May, claims declined over the last few weeks. Additionally, the U.S. economy is forecasted to have added 190,000 jobs in May. The unemployment rate is expected to remain unchanged at 3.9%.

However, a closer look reveals that not everyone is benefiting equally from the resilient jobs market. Particularly, data from the Bureau of Labor Statistics shows the unemployment rate for bachelor’s degree recipients is above 12% for recent college graduates between the ages of 20 and 29. This represents an increase of nearly four percentage points from last year.

The Commerce Department downgraded its estimate for U.S. economic growth to 1.3% for Q1, the weakest quarterly rate since the spring of 2022. The slower growth is primarily driven by two factors that often fluctuate from quarter to quarter—a surge in imports and a reduction in business inventories. A more impactful component of growth accounting for nearly 70% of economic growth, consumer spending, rose at a 2% annual rate.

The Bureau of Labor Statistics reported on May 31 that personal consumption expenditures, excluding volatile food and energy prices, increased by 0.2% in April. This represents a slight deceleration from February and March, where the metric increased by 0.3%. This disinflation, while slight, is still a positive sign from “the Fed’s preferred [inflation] gauge.”

While housing prices remain high, supply has increased across the nation, with 90% of major housing markets in the U.S. seeing more homes for sale in April than at the same time last year, according to a report by ICE Mortgage Technology.

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The ESI’s three-day moving average began this two-week stretch at 32.5 on May 22. It rose to 35.1 on May 24, then fell before rising again to a peak of 35.2 on May 28. The three-day moving average then trended downward to a low of 31.2 on June 2 before rising to 32.9 on June 4 to close out the session.

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The next release of the ESI will be Wednesday, June 19, 2024.

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.