Economic Sentiment Recovers Slightly, Finally Breaking Its Free Fall

Economic sentiment rose slightly over the past two weeks, after dropping to record-lows for each of three consecutive prior readings. The HPS-CivicScience Economic Sentiment Index (ESI) increased 0.9 points to 36.7.

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All but one of the ESI’s five indicators increased this week. Confidence in personal finances and confidence in making a major purchase experienced the greatest gains, rising 2.4 points to 53.1, and 1.5 points to 22.4, respectively.

— Confidence in finding a new job rose 0.9 points to 50.7.

— Confidence in the U.S. economy rose 0.2 points to 34.9.

The only indicator to decrease was confidence in the housing market, which fell 0.6 points to a new record low of 22.4. 

Yesterday, the U.S. Labor Department reported a March Consumer Price Index (CPI) increase of 8.5%, exceeding Dow Jones estimates of a 8.4% jump. The agency also reported initial jobless claims fell to 166,000, their lowest level since 1968. At present, there are over 5 million more employment openings than available workers in the country.

Rising interest rates are permeating the housing market, which is currently digesting the unusual combination of rising home prices and rising mortgage rates; last week, the 30-year fixed-rate home loan increased to 4.72%, the highest figure since December of 2018. According to mortgage-financier Freddie Mac, the rate rose 1.5 percentage points over the past 90 days, the quickest three-month increase since 1994.

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The ESI’s three-day moving average began this two-week stretch at 37.0 on March 30. It hit its two-week high of 38.8 on April 4, its low of 33.5 on April 9, and closed the session at 37.8 on April 12.

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The next release of the ESI will be Wednesday, April 27, 2022.