Economic sentiment remains fairly steady

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) decreased by 0.1 point to 41.3, marking a minor 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 the overall U.S. economy decreased the most, falling 3.2 points to 53.5.

—Confidence in buying a new home decreased 1.3 points to 21.5.

—Confidence in finding a new job remained flat at 42.3.

—Confidence in making a major purchase increased 0.9 points to 27.0.

—Confidence in personal finances increased 3.1 points to 62.2.

The Federal Reserve reduced interest rates by 25 basis points on November 7, lowering the target federal funds rate to between 4.5 and 4.75 percent. This marks the second rate cut of 2024, reflecting the Federal Open Markets Committee’s belief that inflation is nearing the Fed’s 2 percent goal. In its statement, the FOMC said that “the risks to achieving its employment and inflation goals are roughly in balance.”

The Fed is also navigating uncertainty following Donald Trump’s election as president, as potential shifts in fiscal, trade, and immigration policies could influence future inflation and growth trajectories. Fed Chair Jerome Powell affirmed that immediate policy decisions would not account for speculative political changes, stating, “in the near term, the election will have no effects on our policy decisions.”

The U.S. Bureau of Labor Statistics released the October Consumer Price Index (CPI) report, showing annual inflation rising to 2.6 percent, a modest increase from September’s 2.4 percent, while the core CPI that excludes food and energy prices rose 3.3 percent over the past year. Both figures aligned with economists’ expectations and reflected mixed inflationary pressures. Shelter costs, responsible for over half of the CPI’s overall increase, rose 0.4 percent in October and 4.9 percent year-over-year, remaining a substantial inflation driver.

Retail sales rose by 0.4 percent in October, matching September’s revised gain, bringing total sales to $718.9 billion, according to the U.S. Census Bureau. Compared to October of last year, sales increased by 2.8 percent. The advance report indicates a steady consumer sector, and economists expect decent continued growth over the holiday shopping season.

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The ESI’s three-day moving average began this two-week stretch at 42.6 on November 6. It then fell to a low of 40.0 on November 9, oscillated slightly, and then rose to a high of 42.4 on November 15. The three-day moving average then decreased to 41.0 on November 18 before rising up to 42.0 on November 19 to close out the session.

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The next release of the ESI will be on Wednesday, December 4, 2024.

Economic sentiment continues to rise into Election Day

Economic sentiment increased to its highest level in over a year, driven by an over five-point jump in confidence in the U.S. economy. The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased by 1.1 points to 41.4.

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Three of the ESI’s five indicators increased during this period. Confidence in the overall U.S. economy increased the most, rising 5.5 points to 56.7. This marks this indicator’s largest increase since July.

—Confidence in finding a new job increased 0.6 points to 42.3. 
—Confidence in buying a new home increased 0.2 points to 22.8.
—Confidence in personal finances decreased 0.1 points to 59.1.
—Confidence in making a major purchase decreased 0.4 points to 26.1.

The U.S. Commerce Department released its advanced estimate of GDP, stating that real GDP increased 2.8 percent in the third quarter of 2024. This represents a slight deceleration from the second quarter of 2024, where real GDP increased 3%. Personal consumption expenditures, a proxy for consumer spending, rose by 3.7% for the quarter—adding 2.46 percentage points to the overall GDP.

Meanwhile, the Bureau of Labor Statistics released the October Jobs Report which showed that the economy added only 12,000 jobs in the month, representing the weakest job growth since December 2020. Meanwhile, the unemployment rate remained unchanged at 4.1 percent. The Bureau noted that the now-concluded strike at Boeing led to a decline of 44,000 jobs in transportation equipment manufacturing and also acknowledged the potential effects of Hurricanes Helene and Milton, stating, “It is likely that payroll employment estimates in some industries were affected by the hurricanes; however, it is not possible to quantify the net effect on the over-the-month change in national employment, hours, or earnings estimates.” 

Meanwhile, economists are predicting that the Federal Reserve will cut interest rates by a quarter percentage point on November 7. This meeting follows the release of the September personal consumption expenditures (PCE) price index from the Bureau of Economic Analysis which increased by 2.1% from September of last year. This data reflects continued progress toward steadying inflation near the Federal Reserve’s 2% target.

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The ESI’s three-day moving average began this two-week stretch at 42.2 on October 23. It then fell to a low of 39.7 on October 26 before rising to 42.8 on October 30. The three-day moving average then decreased to 39.9 on November 1 before rising up to a high of 44.7 on November 5 to close out the session.

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The next release of the ESI will be on Wednesday, November 20, 2024.

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.