The rally continues: economic sentiment increases to its highest point in over a year

Economic sentiment posted another strong increase over the last two weeks. Two things are significant about this latest reading: it represents the biggest single-reading jump in over a year (rising 2.2 points to 37.7) and the ESI now stands at its highest value since March 1, 2022.

Click to view image.

Just as in the last reading, all five of the ESI indicators increased over the past two weeks. Confidence in finding a new job rose the most, increasing 2.8 points to 41.6—the largest increase since June 2023.

—Confidence in buying a new home rose 2.7 points to 22.5.

—Confidence in personal finances rose 2.0 points to 58.2—its highest level in more than a year.

—Confidence in the overall U.S. economy rose 1.7 points to 41.2.

—Confidence in making a major purchase rose 1.4 points to 24.8.

The Labor Department reported that the U.S. economy added 216,000 jobs in December, a figure well above the 170,000 jobs economists projected. Meanwhile, the unemployment rate remained at 3.7% in December. These numbers point to the continued strength of the labor market as we continue into 2024.

The Labor Department also reported that the producer price index—a metric which tracks inflation before reaching consumers—fell 0.1% from November to December. Prices for final demand goods fell also 0.4% in December, this metric’s third consecutive decline. Finally, core wholesale prices, which omit volatile food and energy costs, remained steady from November and were up 1.8% year-over-year. These figures, which were lower than economists had projected, help to point to slowing inflation in the U.S. economy.

The Mortgage Bankers Association reported total mortgage application volumes increased 9.9% in the first week of 2024 compared to the last week of 2023. Additionally, refinance applications increased 19% the first week of 2024 from the last week of 2023. Although average mortgage rates are 39 basis points higher today than one year ago, they have fallen 26 basis points over the past four weeks—meaning there are some borrowers who can benefit from refinancing at current rates.

Click to view image.

The ESI’s three-day moving average began this two-week stretch at 36.7 on January 3. It trended downward to a low of 35.4 on January 6 before rising to a peak of 40.0 on January 9. It then trended downward to 35.9 on January 16 to close out the session.

Click to view image.

The next release of the ESI will be Wednesday, January 31, 2024.