Economic Sentiment Falls After A Month Of Positive Growth

Economic sentiment declined slightly over the past two weeks, following four straight weeks of improvement. The HPS-CivicScience Economic Sentiment Index (ESI) fell 1.0 point to 33.1, largely driven by decreases in confidence in personal finances and in finding a new job.

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All but one of ESI’s five indicators decreased over the past two weeks. Confidence in personal finances fell the most, decreasing 2.0 points to 49.5, followed by confidence in finding a new job, which fell 1.8 points to 43.5. 

— Confidence in the overall U.S. economy fell 1.1 points to 32.5.
— Confidence in buying a new home fell 1.1 points to 20.1.
— Confidence in making a major purchase rose 1.0 point to 20.0.

Last week’s GDP report, which showed that gross domestic product fell by 0.2% in the second quarter, sparked debate over whether the U.S. economy is in or is nearing a recession.  

A slowdown in economic growth was not entirely unexpected, as the White House has argued it is part of a necessary transition to sustainable growth following a year of recovery, and the Federal Reserve has continued increasing interest rates to combat inflation.  

Top Federal Reserve officials have signaled that combating the continued rise in inflation remains the top priority despite the GDP report showing a second consecutive quarter of GDP contraction—a sign that interest rate hikes are unlikely to be over. 

Despite rising interest rates, the S&P 500 had its best month since November 2020, having increased 12% in the last month, but investors still remain skeptical of the lasting positive growth. 

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The ESI’s three-day moving average began this two-week stretch at 34.4 on Wednesday, July 20. It hit a low of 31.9 on Saturday, July 23, before trending upward to a peak of 36.3 on Tuesday, July 26. Coinciding with the Federal Reserve increasing interest rates by 75 basis points on Wednesday, July 27, the moving average began trending downward to close out the session at 32.3.

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The next release of the ESI will be Wednesday, August 17, 2022.

Economic Sentiment Improves For The Second Reading In A Row

Economic sentiment jumped significantly over the past two weeks, marking the second-straight rise in economic sentiment. The HPS-CivicScience Economic Sentiment Index (ESI) rose 3.7 points to 34.1, the first time all five indicators have increased in one session this year.

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All five of the ESI’s indicators rose over the past two weeks. Confidence in the overall U.S. economy rose the most, increasing 5.5 points to 33.6, the largest single jump of the past twelve months.

—Confidence in personal finances rose 5.1 points to 51.5.

—Confidence in finding a new job rose 3.0 points to 45.3.

—Confidence in buying a new home rose 2.6 points to 21.2.

—Confidence in making a major purchase rose 2.5 points to 19.0

While confidence in the overall U.S. economy rose the most, confidence in personal finances and finding a new job remained the highest indicators, continuing a trend of consumers feeling more positive about their own personal situations compared to the economy as a whole. 

The job market was strong in June, as employers added 372,000 jobs and the unemployment rate stayed at 3.6 percent, a near 50-year low. However, even with the additional jobs, employers had 11.3 million jobs open in May; nearly two jobs for every person looking for work.
Despite inflation continuing to rise—reaching 9.1% above a year ago in June—there are signs it may have peaked. Core prices, which exclude food and energy items, were up 5.9% from a year earlier, down from this March’s decade high of 6.5%.

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The ESI’s three-day moving average began this two-week stretch at 31.9 on Wednesday, July 6. It hit a low of 31.5 on Thursday, July 7 before trending upwards to 35.8 on Tuesday, July 12. The moving average trended slightly downwards for a few days before recovering to close out the session at 36.1, a two week high.

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The next release of the ESI will be Wednesday, August 3, 2022.

Economic Sentiment Recovers Slightly, Driven By Confidence In Personal Finances

Economic sentiment improved slightly over the past two weeks, on the heels of a nearly five point decrease the previous two weeks. The HPS-CivicScience Economic Sentiment Index (ESI) rose 0.8 points to 30.4, largely driven by increases to confidence in personal finances and in the overall U.S. economy.

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The ESI continues to be buoyed by how consumers feel about their own situation compared to the broader economy—confidence in personal finances rose 3.9 points to 46.4.

— Confidence in the overall U.S. economy rose 2.8 points to 28.1.

— Confidence in buying a new home rose 0.4 points to 18.6.

— Confidence in making a major purchase fell 0.9 points to 16.5.

But confidence in finding a new job fell 2.2 points to 42.3. Continuing unemployment claims have risen for three straight weeks. And the four-week average of new jobless claims rose to 223,500—the highest since late January.

Consumers are showing signs that they’re adapting to the growth in food and fuel prices. Over 15% of US adults said they opted for lower-priced alternatives for groceries in May, up more than 3 percentage points compared to April.
And the core price index, which measures prices outside of the volatile food and fuel sectors, climbed at a rate of 4.7% over the past 12 months, down from the prior reading of 4.9%.

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The ESI’s three-day moving average began this two-week stretch at 28.2 on Wednesday, June 22. It hit a low of 28.1 on Saturday, June 25 before hitting the two-week high of 32.4 on Thursday, June 30. The moving average trended slightly downwards for the rest of the two weeks before a slight uptick over the holiday weekend to close out the session at 31.4.

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The next release of the ESI will be Wednesday, July 20, 2022.

Economic Sentiment Falls Sharply, Following Downturn On Wall Street

Economic sentiment fell sharply over the past two weeks, dropping 4.6 points to 29.6. This is the largest two-week decline in the past year, and the lowest reading since the HPS-CivicScience Economic Sentiment Index (ESI) began measuring public sentiment about the U.S. economy in 2013.

All five of the ESI’s indicators fell over the past two weeks. Confidence in personal finances fell the most—by 8.3 points—marking the first time in four months that the survey did not find it to be the highest indicator.

— Confidence in the overall U.S. economy fell 6.3 points to 25.3.

— Confidence in finding a new job fell 3.6 points to 44.5

— Confidence in buying a new home fell 2.9 points to 18.2.

— Confidence in making a major purchase fell 1.8 points to 17.4.

Weeks of speculation around the Fed’s decision to further tighten U.S. monetary policy by raising interest rates were confirmed last week, when Chair Jerome Powell announced an increase of 0.75%—the highest rate hike in nearly three decades.

The Fed’s decision came on the heels of a May inflation report showing the highest increase in consumer prices since 1981, up 8.6% in the past 12 months. Fuel prices have more than doubled in the past year, rising 106.7%, while food prices have shown a year-over-year price gain of 10.2%. 

Housing costs, which determine around a third of the Consumer Price Index, increased 5.5%, the fastest 12-month increase in 31 years. 

Surging inflation has contributed to a decline in purchasing power, with prices outgrowing incomes by 0.6% compared to April, and real wages declining 3% over the past year.

The ESI’s three-day moving average correlated significantly with stock market performance over the past two weeks. It began this two-week stretch at a high of 33.4 on June 8. It declined steadily to 27.6 on June 18, coinciding with the worst weekly decline of the S&P in two years. The ESI recovered slightly to close out the period at 29.6 on June 21.

The next release of the ESI will be Wednesday, July 6, 2022.

Economic Sentiment Improves After A Six Week Period Of Decline

Economic sentiment recovered slightly over the past two weeks, following six straight weeks of decline. The HPS-CivicScience Economic Sentiment Index (ESI) rose 0.9 points to 34.2, largely driven by confidence in the housing market and the health of the U.S. economy overall.

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While the aggregated index rose, only two of the ESI’s five indicators measuring the public’s sentiment about different areas of the economy increased. Confidence in purchasing a new home rose 3.0 points to 21.1, while confidence in the U.S. economy rose 2.9 points to 31.6. 

— Confidence in making a major purchase remained steady at 19.2.

— Confidence in finding a new job fell 0.2 points to 48.1.

— Confidence in personal finances fell 1.3 points to 50.8.

Confidence in personal finances and finding a new job remained the highest indicators of confidence, continuing a trend of consumers feeling better about their own personal situation compared to the rest of the economy. 

The past two weeks marked a tone shift in public statements from business leaders about the economic outlook for the remainder of 2022. JPMorgan Chase CEO Jamie Dimon said the largest U.S. bank is preparing for an economic “hurricane.” Retail stocks slumped following Target issued a warning that profit margins are likely to further decline due to a supply glut going into the summer. And Tesla CEO Elon Musk said he has a “super bad” feeling about the economy, predicting the electric car company may have to cut 10% of U.S. jobs. 

Despite these gloomy predictions, the U.S. job market has remained strong, with 11.4 job openings as of April 29. Senior economist David Tinsley from the Bank of America Institute said incomes increased by 9.2%, a rate higher than the current inflation of 8.4%. This has largely been attributed to a recovery in service sector jobs, as the U.S. enters its first full summer without COVID restrictions since 2019.

The ESI’s three-day moving average began this two-week stretch at 32.7 on May 25. It hit its two-week high of 36.1 on Sunday, May 29. The moving average settled at a low of 32.9 for June 3 and 4, before rebounding to 35.6 to close out the session on June 7.

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The next release of the ESI will be Wednesday, June 22, 2022.