Economic sentiment rises as confidence in the overall U.S. economy jumps

Economic sentiment increased over the past two weeks, the third-straight rise. The Penta-CivicScience Economic Sentiment Index (ESI) rose 0.4 points to 33.4, driven by the largest increase in confidence in the U.S. economy in over a year. 

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Two of the ESI’s five indicators increased over the past two weeks. Confidence in the overall U.S. economy improved the most, increasing 5.5 points to 39.5, its highest level since the first week of January. 

—Confidence in personal finances rose 0.5 points to 51.6.

—Confidence in finding a new job fell 1.7 points to 40.0.

—Confidence in buying a new home fell 1.5 points to 18.5

—Confidence in making a major purchase fell 0.8 points to 17.4.

The U.S. economy is showing some positive signs, including the Federal Reserve Bank of Atlanta’s prediction of a 4.2% growth for real GDP in the fourth quarter of 2022, leading some to believe the economy may indeed achieve the “soft landing” the Fed has been hoping for. The strong prediction has been accompanied by signs of slowing inflation, such as wholesale prices—which rose by 8% in October from a year before, the smallest increase since July of last year. 

U.S. retail sales rose sharply in October, increasing 1.3% compared with September, while retailers themselves are experiencing a decline in revenue ahead of the holiday season. Strong consumer spending persists amid high inflation, climbing interest rates, and an overall challenging economic climate.

Meanwhile, major companies, primarily tech companies, including Amazon, Twitter, Carvana, Robinhood, and others reduced their workforce by hundreds or thousands in November. These sweeping layoffs have helped fuel concerns about the labor market.

The housing market also saw signs of trouble, with home sales in the U.S. declining for the ninth month in a row in October. Along with the falling home sales has been a decline in housing starts, a measure of new construction, and a rise in prices.  

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The ESI’s three-day moving average began this two-week stretch at 32.6 on November 9. It fell to a low of 30.8 on November 12 before rising to 34.6 on November 15. The three-day average then trended downward to 32.7 on November 18, rose to a peak of 36.0 on November 21, before falling to 34.8 on November 22 to close out the session. 

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The next release of the ESI will be Wednesday, December 7, 2022.

Economic Sentiment Rises, Bolstered By Better-Than-Expected GDP Report

Economic sentiment increased over the past two weeks. The Penta-CivicScience Economic Sentiment Index (ESI) rose 0.8 points to 33.0, largely driven by an increase in confidence in the U.S. economy.

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All five of the ESI’s indicators increased over the past two weeks. Confidence in the overall U.S. economy improved the most, increasing 2.3 points to 34.0.  

—Confidence in finding a new job rose 0.1 points to 41.7.

—Confidence in personal finances rose 1.1 points to 51.1.

—Confidence in buying a new home rose 0.2 points to 20.0.

—Confidence in making a major purchase rose 0.1 points to 18.2.

After two consecutive quarters of economic contraction, U.S. GDP beat predictions and increased by a 2.6% annualized rate in the third quarter, according to the Bureau of Economic Analysis advance estimate. The report also showed that consumer spending rose 0.4%, slightly down from 0.5% last quarter, although some economists question how long this can last as Americans only saved 3.3% of their after-tax income in the third quarter, the smallest share since 2007.

While the GDP report showed positive signs for the economy—the Dow climbed 0.6% the day of the release—it also highlighted the challenging position of the economy as the federal government seeks a “soft landing” for the economy. 

This volatility comes alongside the November 8 midterm election cycle. With issues like high inflation and rising prices at the top of voters’ minds, the results will certainly impact future economic policy as lawmakers continue to navigate a difficult economic environment. 

Meanwhile, the job market remained strong but showed signs of weakening. According to the U.S. Department of Labor jobs report, employers added 261,000 jobs in October, compared to a revised 315,000 jobs the month before. In addition to the slowing growth, which was not entirely unexpected as employers have already replaced all of the 22 million jobs that were lost during the pandemic, the unemployment rate rose to 3.7% from 3.5%.

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The ESI’s three-day moving average began this two-week stretch at 31.5 on Wednesday, October 26 before trending upward to 33.3 on Saturday, October 29. It then fell to 32.5 on Sunday, October 30 before rising to a two-week peak of 34.3 on Wednesday, November 2. The three-day average then trended downward to a low of 31.5 on Tuesday, November 8 to close out the session. 

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The next release of the ESI will be Wednesday, November 23, 2022.

Economic Sentiment Rises Despite Fears Of Recession

Economic sentiment increased over the past two weeks. The Penta-CivicScience Economic Sentiment Index (ESI) rose 0.3 points to 32.2, driven by an increase in confidence in personal finances.

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Four of the ESI’s indicators increased over the past two weeks. Confidence in personal finances changed the most, increasing 1.7 points to 50.0.  

—Confidence in finding a new job rose 1.0 points to 41.6.

—Confidence in the overall U.S. economy rose 0.3 points to 31.8. 

—Confidence in buying a new home fell 0.1 points to 19.6.

—Confidence in making a major purchase fell 1.2 points to 18.0.

While there have been signs of a potential economic downturn, confidence in personal finances increased over the past two weeks as earnings reports from major banks suggest that U.S. consumers remain in a strong position. For instance, Bank of America consumer deposits grew 1%, and credit card spending grew 13% in their most recent quarterly earnings, while American Express customer spending jumped 21% year over year.  

Yet, 63% of employed consumers are living paycheck-to-paycheck as of September 2022, compared to around 57% just one year ago. This rise is largely attributed to wages failing to keep up with inflation despite the fact that they have increased 4.9% over the past year. 

This trend comes as U.S. households prepare for a recession, with new surveys showing 76% of respondents are making changes to their lifestyle in preparation for the downturn and the number one adjustment being delaying major purchases. 

An updated GDP report, which economists predict will show that the U.S. economy grew in Q3, is scheduled for release on October 27. A model produced by the Federal Reserve Bank of Atlanta predicts an increase of 2.9%, even amidst persistent inflation and interest rate hikes. 

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The ESI’s three-day moving average began this two-week stretch at a low of 29.6 on Wednesday, October 12. It trended upward to 33.5 on Monday, October 17 before falling to 31.2 on Friday, October 21. The three-day average then trended upward to a peak of 33.8 on Sunday, October 23 before falling to 32.0 to close out the session. 

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The next release of the ESI will be Wednesday, November 9, 2022.

Economic Sentiment Falls, Driven By Sharp Decrease In Confidence In Finding A New Job

Economic sentiment decreased over the past two weeks. The Penta-CivicScience Economic Sentiment Index (ESI) fell 1.6 points to 31.8, driven by the largest decrease in confidence in finding a new job in over a year.

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All five of the ESI’s indicators decreased over the past two weeks. Confidence in finding a new job changed the most, decreasing 4.9 points to 40.7, the indicator’s lowest point in over a year. 

—Confidence in personal finances fell 1.0 points to 48.1.

—Confidence in the overall U.S. economy fell 0.7 points to 31.5.

—Confidence in making a major purchase fell 0.7 points to 19.0.

—Confidence in buying a new home fell 0.5 points to 19.8.

Despite the unemployment rate falling in September to 3.5% from 3.7%, there is growing concern with the labor market. While the unemployment rate fell, the job market showed signs for concern, including an October 4 Bureau of Labor Statistics report finding U.S. job openings falling by 6.2% in August. Additionally, the rate of layoffs began to slightly tick up, increasing 1% in August as some predicted the U.S. economy will begin losing 175,000 jobs a month. 

Leading financial executives, including Ken Griffin and Jamie Dimon, are predicting a U.S. recession is imminent. They cite continued concern over rising inflation and interest rates, as well as Russia’s invasion of Ukraine as a few of the reasons. 

While wages rose 0.3% on a monthly basis in September, the growth has failed to keep up with inflation—which remains a top concern for the Federal Reserve. On Friday, October 2, New York Federal Reserve President John Williams affirmed the Fed’s focus on combating inflation, warning of more interest rate hikes and that the unemployment rate is likely to rise. 

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The ESI’s three-day moving average began this two-week stretch at 31.3 on Wednesday, September 28 before trending downward to a two-week low of 30.5 on Thursday, September 29. The three-day then trended upward to a peak of 34.0 on Thursday, October 6, before falling to 30.5 close out the session.

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The next release of the ESI will be Wednesday, October 26, 2022.

Economic Sentiment Falls As Interest Rates Continue To Rise

Economic sentiment decreased over the past two weeks amid an additional Fed rate hike, rising mortgage rates, and falling home prices. The Penta-CivicScience Economic Sentiment Index (ESI) fell 0.4 points to 33.4, largely driven by a decrease in confidence in buying a new home.

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Three of the ESI’s five indicators decreased over the past two weeks. Confidence in buying a new home changed the most, decreasing 2.4 points to 20.3, while confidence in the overall U.S. economy fell 1.9 points to 32.2.

—Confidence in personal finances fell 0.1 points to 49.1.

—Confidence in making a major purchase rose 0.1 points to 19.7.

—Confidence in finding a new job rose 2.3 points to 45.6.

On Wednesday, September 21, the Federal Reserve raised benchmark interest rates for the third straight time– increasing the base rate by 0.75 percentage points to take it to its highest level since before the 2008 Global Financial Crisis. The increase comes as the Federal Reserve continues to attempt to combat inflation via aggressive rate hikes. 

Along with the interest rate hike has come a jump in U.S. mortgage rates, with the average rate on a 30-year fixed mortgage rising to 6.52% as of Wednesday, September 28. Home prices, which soared between 30-40% in the past two years, have receded from their peak in June as experts predict home sale volume to fall sharply as the market adjusts. 

Meanwhile, the Federal Reserve’s aggressive drive to bring inflation down has led the Federal Open Market Committee to predict an increase in unemployment from 3.7% in August to 3.8% by the end of the year, and 4.4% next year, where it will likely stay through 2024. The prediction would result in an additional 1.5 million Americans becoming unemployed. 

Despite predictions of rising unemployment as the market appears to be slowing down, confidence in finding a new job remained strong over the past two weeks. The increasingly challenging job market is not uniform across industries, with some, such as manufacturing, continuing to experience significant increases in hiring opportunities.

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The ESI’s three-day moving average began this two-week stretch at 35.4 on Wednesday, September 14. It trended upward to 35.5 on Thursday, September 15 before trending downward to 32.5 on Sunday, September 18. The three-day then trended upward to a peak of 35.6 on Friday, September 23, before falling to 31.5 close out the session.

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The next release of the ESI will be Wednesday, October 12, 2022.