Economic Sentiment Drops To Another Record Low

Economic sentiment fell over the last two weeks, dropping below the previous all-time low by a 1.3 point margin. From reading to reading, the HPS-CivicScience Economic Sentiment Index (ESI) decreased 1.5 points to 34.5.

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For the second straight time, all but one of the five indicators decreased. Confidence in buying a new home fell 1.4 points to 19.3, a new record low, while confidence in the U.S. economy dropped 2.9 points to an all-time low of 31.6.

— Confidence in finding a new job fell 0.3 points to 49.8.

— Confidence in personal finances fell 2.9 points to 50.6.

The only indicator to improve was confidence in making a major purchase, which rose 0.4 points to 21.4.

Last week, Chairman Jerome Powell announced that the Federal Reserve would hike its benchmark interest rate by 50 basis points in response to inflation and the “hardship it is causing.” Chairman Powell indicated, however, that the Fed is not “actively considering” raising rates by 75 basis points.

This week, the S&P 500 fell below 4,000 for the first time since March of 2021, and the 10-year Treasury yield rose above 3% for the first time since 2018. The tech-heavy Nasdaq is also officially in bear market territory, as stocks like Meta, Alphabet, Amazon, Apple, and Netflix have seen their values fall. 

The Labor Department released its monthly jobs report for April last week, which indicated that while 428,000 net new jobs were added to the economy and unemployment remained at 3.8%, the labor participation rate fell by 0.2 percentage points to 62.2%.

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The ESI’s three-day moving average began this two-week stretch at 35.6 on April 27. It hit its two-week high of 36.0 the following day and its low of 33.1 on May 4. The three-day moving average closed the session at 35.7 on May 10.

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The next release of the ESI will be Wednesday, May 25, 2022.