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.