Economic Sentiment Plateaus In The First Full Reading Of The Biden Administration

Economic sentiment held flat over the past two weeks, maintaining a reading of 47.7, according to the HPS-Civic Science Economic Sentiment Index (ESI). Despite bumps in confidence in the job market and U.S. economy, the reading was weighed down by a significant decline in Americans’ confidence in their personal finances.

Three of the ESI’s five indicators increased over the past two weeks. Climbing the most was confidence in the job market which rose 1.3 points to 41.0, returning to a level similar to that recorded before the most recent COVID surge. Confidence in the U.S. economy and making a major purchase also experienced slight upticks, increasing 0.8 and 0.5 points, to 50.9 and 42.5 respectively. Falling the most was confidence in personal finances, which dropped 1.9 points to 53.9. Despite the continued distribution of economic impact payments throughout January, confidence in personal finances has now fallen 3.4 points since the start of January. Confidence in the housing market also fell, declining 1.0 point to 50.2.

This is the first full ESI reading under the new Biden Administration, which has prioritized COVID-related policies such as increased vaccination distribution and advocating for another round of economic stimulus. The size and scope of the stimulus is still unclear as Republican Senators who met with President Biden on Monday have offered a smaller, trimmed down stimulus that could pass on a bipartisan basis, while Democratic leadership continues to support advancing a significantly more robust, likely partisan, stimulus package. Despite a litany of economic data showing that growth, and employment slowed in the Q4 of 2020, the Congressional Budget Office released some positive projections that U.S. growth will return to pre-pandemic levels later this year and employment may fall to 5.3 percent.

Despite the ESI’s level reading, the three-day moving average ticked upwards in the closing days of the period. The moving average began on January 20 at 49.8 and peaked the following day at 50.4 It then maintained a relatively steady decline to its low of 44.8 on January 30. The average closed the reading on an upswing, closing at 48.3 on February 2.

The next release of the ESI will be Wednesday, February 17, 2021.