US index hits record high even as economic uncertainty rises
Vermont Business Magazine Citizens reported today that the National Citizens’ Business Condition Index fell five points in Vermont over the past quarter, but remains above the crucial 50 mark. Meanwhile, the CBCI has reached 59.5 nationwide for the first quarter of 2022, up sharply from 54.4 at the end of 2021 and reaching its highest level since citizens began tracking the data in 2014, suggesting that the lessons learned by businesses during the pandemic coupled with strong consumer demand were a powerful combination.
The CBCI has been in expansion territory (above 50) for six consecutive quarters, but the latest value even exceeds the first “reopening bounces” that emerged in early 2021 and signals that resilient companies that have streamlined their operations during the first waves of the pandemic were able to benefit from a boosted post-Omicron rebound.
“Demand is still strong, leading to strong trading conditions,” said Eric Merlis, managing director, Global Markets, Citizens. “However, inflation is a major concern. It is not just a strong economy that is causing the problem: pressures from supply chain backlogs and the invasion of Ukraine have made the situation worse. This is a critical time for policy makers to address all these issues.
Positive indicators regarding trading conditions are reaching new highs as uncertainty intensifies in a number of areas. Inflation continues to rise, posting a year-on-year pace of 8.6% in March, the highest level since 1981. Multiple factors have added pressure on prices, including the grip continued COVID on critical production pipelines, especially in China, and the invasion of Ukraine. by Russia. Against this backdrop, the Federal Reserve implemented a 25 basis point rate hike last month in its first tightening measure of this economic cycle and market expectations for future rate hikes have been adjusted even higher. .
All five components of the index were additive in the first quarter, an atypical scenario even in other periods of robust business activity. Both the manufacturing and non-manufacturing indices from the Institute of Supply Management (ISM) posted expansionary levels even though their readings were down from the fourth quarter.
Employment levels also boosted the index reading. Initial unemployment insurance claims fell and job postings continued to eclipse the number of job seekers. During this time, demands for the creation of new businesses were also strong.
Commercial activity continued within the corporate clientele of Citizens, the latest component of the CBCI. All sectors advanced in the first quarter, with energy companies leading the gains as commodity prices surged following Russia’s invasion of Ukraine. Oil prices peaked in early March and have been above pre-COVID levels since mid-2021. Basic materials companies also performed extremely well, as did healthcare companies.
Supported by healthy household balance sheets and stable incomes, consumer spending was strong in the first quarter. However, sentiment is waning as consumers grow increasingly concerned about inflation and future economic growth. Wages have risen and could rise, but they are generally not keeping pace with rising gas, food and housing prices.
Although the path of inflation remains to be determined, this level of activity could either prove to be sustainable or begin to moderate. As policymakers continue to remove monetary support and if supply chain pressures ease, the outlook for inflation could be one of gradual moderation.
“As we hit a new index high, the jury is out on whether the Fed can stage a soft landing and keep trading conditions high,” Merlis added.
The index draws on publicly available information and proprietary company data to establish a unique view of economic conditions across the country. An index value above 50 indicates expansion and indicates positive business activity for the next quarter. For more information on the index for the last quarter, please click here.
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29.04.2022. PROVIDENCE, RI – Citizens. “Footprint” refers to the region covered by Citizens Bank.