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.

Economic sentiment dips to its lowest point this year

Economic sentiment decreased over the last two weeks, falling for the third consecutive reading to its lowest point since December. The Penta-CivicScience Economic Sentiment Index (ESI) decreased 1.2 points over the last two weeks to 34.5.

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Four of the ESI’s five indicators decreased over the past two weeks. Confidence in personal finances decreased by 3.5 points, falling to 53.2, marking that indicator’s largest single-period decrease in over a year.

—Confidence in finding a new job fell 1.3 points to 36.4.

—Confidence in making a major purchase fell 1.3 points to 24.1.

—Confidence in the overall U.S. economy fell 0.8 points to 36.6.

—Confidence in buying a new home rose 1.1 points to 22.5.

The February 2024 jobs report showed nonfarm payroll employment increased by 275,000 in February. This increase beat economics’ predictions, in part due to hirings in health care and by the government. Despite this increase, the unemployment rate rose to 3.9 percent, up from 3.7 percent in January and marking the highest rate since January 2022.

Federal Reserve Chair Jerome Powell traveled to Congress on March 6 to make his semi-annual testimony before lawmakers. Here, Powell affirmed that he does not believe the U.S. is in or at risk of a recession. Powell also claimed that the Fed believes that the “policy rate is likely at its peak for this tightening cycle,” but that rate cuts “really will depend on the path of the economy.” Atlanta Fed President Raphael Bostic echoed Powell’s sentiments, stating “Only when I gain that confidence will I feel the time is right to begin lowering the federal funds rate.”

The prospect of rate cuts was made more unlikely following the release of the U.S. Bureau of Labor Statistics’ February Consumer Price Index. The Bureau reported that core CPI increased by 0.4 percent month over month in February, and that prices rose by 3.2 percent over the last year. The Bureau reported that over 60 percent of this month-over-month increase was driven by the cost of gasoline and shelter. This is the second consecutive month that core inflation has increased by 0.4 percent.

The Federal Reserves’ “Beige Book” survey, which polled business across the Fed’s 12 districts the six weeks prior to February 26, found that eight of the Fed’s 12 regional banks reported a “slight to modest growth in activity.” However, this good news was also met with mixed data on the overall health of the U.S. economy. Specifically, the report detailed how consumers “became increasingly sensitive to price changes,” even though almost every district reported “some improvement in labor availability and employee retention.”

Despite these mixed results, Business Roundtable’s Q1 CEO Economic Index showed optimism in the U.S. economy, with the index increasing above its historical average for the first time since 2022. Specifically, the Index increased by 11 points, up from 74 in Q4 2023 to 85 in Q1 2024. This increase was largely driven by the “plans for capital investment” indicator, which increased 16 points to 78.

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The ESI’s three-day moving average began this two-week stretch at 36.1 on February 28. It then rose to a peak of 36.5 on February 29 before decreasing to a low of 33.1 on March 3. The three-day moving average then trended upward to 35.6 on March 9 before falling to to 34.6 to close out the session on March 12.

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The next release of the ESI will be Wednesday, March 27, 2024.

Economic sentiment falls to its lowest point since early January

Economic sentiment decreased over the last two weeks, falling to its lowest point since the first week of January. The Penta-CivicScience Economic Sentiment Index (ESI) decreased 1.4 points over the last two weeks to 35.7.

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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 2.2 points to 37.4, marking that indicator’s largest single-period decrease since August 2023.

—Confidence in making a major purchase fell 1.7 points to 25.4.

—Confidence in buying a new home fell 1.6 points to 21.4.

—Confidence in finding a new job fell 1.4 points to 37.7.

—Confidence in personal finances increased 0.3 points to 56.7.

Lawmakers are facing an impending government shutdown as budget negotiations continue to stall in Congress. Friday, March 1 marks a key deadline for Federal funding, where, without an agreement, funding will run out and force the government into a partial shutdown. CNN reports that House Speaker Mike Johnson (R-LA) is facing pressure from members of his party advocating for conservative policies added to the spending bills.

On February 15, both Japan and the United Kingdom reported negative gross domestic product (GDP) for the fourth quarter of 2023. This marked the second consecutive quarter that these economies weakened, thus meeting a broadly accepted criteria for a recession. 

Over the past two weeks, Barron’s reported that The Conference Board’s Leading Economic Index fell 0.4% in January, and therefore, “Economic activity in the U.S. no longer faces an imminent threat of recession.” In contrast, Citi’s chief US economist, Andrew Hollenhorst, cast doubt on a soft landing, noting a concerning outlook in the economy’s forward-looking indicators such as inflation and the unemployment rate.

Stocks continued to rally during this period, with the S&P and the Dow Jones Industrial Average breaking record highs on February 23. This was partly fueled by technology company Nvidia, whose fourth quarter results beat already high expectations, causing the stock’s market capitalization to increase by $277 billion, marking the largest single-day increase in history.

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The ESI’s three-day moving average began this two-week stretch at 36.2 on February 14. It then decreased to 35.6 on February 15 before increasing to a peak of 36.9 on February 19. The three-day moving average then decreased to 35.1 on February 22, then oscillated between increasing and decreasing before rising to 36.1 to close out the session on February 27. 

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The next release of the ESI will be Wednesday, March 13, 2024.

Economic sentiment increases slightly

Economic sentiment increased slightly over the last two weeks after falling for the first time in 2024 in the last report. The Penta-CivicScience Economic Sentiment Index (ESI) increased 0.3 points over the last two weeks to 37.1.

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Two of the ESI’s five indicators increased over the past two weeks. Confidence in buying a new home rose the most, increasing 2.0 points to 23.0.

—Confidence in making a major purchase rose 1.6 points to 27.1. This indicator, which also increased last period, has firmly recovered from its low point in October 2023 and is again at its highest point in over a year.

—Confidence in personal finances fell 0.3 points to 56.4.

—Confidence in the overall U.S. economy fell 0.5 points to 39.6.

—Confidence in finding a new job fell 1.4 points to 39.1.

The January 2024 jobs report showed that nonfarm payroll employment increased by 353,000 in January, while the unemployment rate stayed constant at 3.7 percent for the third consecutive month. This increase in employment can be attributed to higherings across industries. CNN reported that this gain “blew economists’ expectations out of the water,” with most forecasts predicting a gain of 176,500 jobs in January.

This stunning jobs report is believed to have cemented the Federal Reserves’ anticipated decision to refrain from cutting interest rates in March. In an appearance on 60 Minutes, Fed Chair Jerome Powell stated that rate cuts are “unlikely” to occur in March and expressed that the Fed needs to feel “more confident” that inflation is reducing before cuts occur.

These prospects of an early cut almost diminished following the release of the January consumer price index (CPI), which increased by 0.3 percent from December. This amounts to a 3.1% increase in the all items index over the past year, down from 3.4% in December.

Despite the stock market’s slight lull following Powell’s comments, the S&P continued to barrel past previous record highs, with the index closing above 5,000 for the first time on February 9.

Mortgage rates also reacted to the jobs report. The average 30-year fixed mortgage rate increased above 7% following the release of the report as the housing market reacted to the decreased likelihood that the Fed will cut the federal funds rate.

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The ESI’s three-day moving average began this two-week stretch at 34.6 on January 31. It then increased to 37.8 on February 3 before trending downward to 36.0 on February 7. The three-day moving average then increased to its highest point of 38.7 on February 11 before decreasing to 37.5 to close out the session on February 13.

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