Economic sentiment falls after last reading’s record bump
Economic sentiment slightly decreased over the past two weeks. The Penta-CivicScience Economic Sentiment Index (ESI) fell 0.4 points to 36.5.
Three of the ESI’s five indicators decreased over the past two weeks. Confidence in personal finances fell the most, dropping 1.6 points to 55.2.
—Confidence in the overall U.S. economy fell 1.2 points to 35.9, its largest drop of 2023.
—Confidence in buying a new home fell 0.9 points to 24.0.
—Confidence in making a major purchase rose 0.6 points to 24.0.
—Confidence in finding a new job rose 1.0 points to 43.3.
Confidence in the overall U.S. economy fell as U.S. stocks had their worst weekly performance of the year the week of February 19, with the S&P 500 decreasing 2.7%, the Nasdaq dropping 3.3%, and the Dow falling 3%.
Consumers also saw the average rate on a 30-year fixed mortgage surge to 6.96% from 6.73% the week of February 26, marking the third consecutive week of significant mortgage rate increases.
According to a report from Fannie Mae, volumes of both new and existing home sales are predicted to fall 5.4% and 19.2% respectively as the firm expects high mortgage rates to continue to keep many buyers sidelined.
Spotlight on personal savings: Confidence in personal finances and Americans’ personal savings rate have moved close to lockstep since June of last year. The savings rate has been increasing over the past few months and sits at 4.7% as of January 2023. However, it is still drastically lower than the mark of 9.3% in February 2020. Despite the rise in the savings rate, which has also been accompanied by increases in personal disposable income, credit card debt exceeds savings for more than a third (36%) of U.S. adults.
The ESI’s three-day moving average began this two-week stretch at 35.8 on February 15. It then rose to a peak of 39.6 on February 19 before falling to 35.5 on February 22. The three-day average then trended upward to 37.4 on February 24, before falling to a low of 34.3 on February 28 to close out the session.
The next release of the ESI will be Wednesday, March 15, 2023.