Citizens reported that the Citizens Business Conditions Index (CBCI) fell slightly to a mark of 57.1 in Q3/21 from Q2/21’s reading of 57.4. Despite the decrease, Citizens said the third quarter’s reading reflects continued strength in the recovery since COVID-19 stunned the economy and markets in 2020. The CBCI has been in expansionary territory (greater than 50) for four straight quarters.
“Business activity is incredibly strong and confidence levels are quite high,” Tony Bedikian, head of global markets at Citizens, said. “We haven’t fully exited the pandemic yet, but at this stage, most parts of the economy have established some normalcy given the benefit of vaccines and the fiscal and monetary stimulus that continue to provide support towards full recovery. Many companies are doing well and would be doing even better if it weren’t for headwinds such as supply chain disruption and labor shortages.”
Nearly all of the underlying components in the CBCI demonstrated strength in the quarter. The Institute for Supply Management’s indexes for manufacturing and non-manufacturing sectors were notably robust. Monthly readings for the two measures continued to trend in the 60s through the third quarter, which was well above the index averages from 2013 to 2019, another expansionary period. Such high readings are often seen in the first wave of a recovery, but it is unusual to see them persist at that level for such a protracted time, according to Citizens. The ISM indexes capture sentiment along with activity, and these high readings demonstrate the confidence throughout the economy, Citizens noted, while adding that other measures of business activity were incredibly high, including the proprietary activity data of Citizens’ commercial banking clients, which is an underlying component of the CBCI.
The same trends were evident in consumer spending, which has been supported by continued improvement in employment (another underlying component of the CBCI). Spending on clothing, health care and gasoline has fully recovered since the pandemic began, though spending on travel accommodations and dining out still hover slightly below normal, according to an analysis of card transactions from the U.S. Bureau of Economic Analysis.
The CBCI is derived from multiple underlying components, almost all of which improved during the third quarter:
According to Citizens, despite ongoing challenges from the pandemic, the third quarter was a period of strong demand across most sectors of the economy. With the continued support of low interest rates and fiscal spending initiatives, most sectors seem to have established a healthy trajectory of growth. Concerns over higher inflation have increased, and the employment sector still has ground to cover to reach pre-COVID status. Still, business conditions have benefited as the pandemic eases and the recovery matures.
The CBCI draws from public information and proprietary corporate data to establish a view of business conditions across the United States. An index value greater than 50 indicates expansion and points to positive business activity for the next quarter.
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