Citizens Business Conditions Index™ Rises in Q4

Rhea-AI Summary

The national Citizens Business Conditions Index™ (CBCI) rose to 51.8 in the fourth quarter, supported by continued resilience in the labor market and consumer trends. Solid employment trends, particularly in Local Government and Healthcare, contributed to improving economic conditions in the fourth quarter. Healthcare and Consumer Services were among the top sectors, while the Basic Materials and Energy sectors faced headwinds. The ISM non-manufacturing component remained expansionary as consumers continued to spend on travel and recreational services. Overall, the fourth quarter CBCI revealed a business environment that is reverting toward its long-term growth trend, providing an optimistic starting point for 2024.

Positive

• The national Citizens Business Conditions Index™ (CBCI) rose to 51.8 in the fourth quarter, indicating a strong economy
• Solid employment trends, particularly in Local Government and Healthcare, contributed to improving economic conditions in the fourth quarter
• Healthcare and Consumer Services were among the top sectors, showing strong performance
• The ISM non-manufacturing component remained expansionary as consumers continued to spend on travel and recreational services

Negative

• The ISM manufacturing component was contractionary for the fifth consecutive quarter, indicating challenges in the manufacturing sector

Insights

Economist

The uptick in the Citizens Business Conditions Index to 51.8 is indicative of a cautiously optimistic economic outlook as we transition into 2024. This increment is particularly notable given that it represents a consistent performance above the neutral 50 mark, suggesting expansion. A key driver of this positive sentiment is the labor market's resilience, which is a fundamental component of economic health. Employment trends, especially in sectors such as Local Government and Healthcare, have shown robustness, which in turn fuels consumer spending—a major engine of the U.S. economy.

Another point of interest is the mention of moderating inflation. This is a critical factor, as high inflation can erode purchasing power and dampen consumer confidence. The report's indication of inflation normalization can be seen as a green light for consumer spending and business investment, which are vital for sustained economic growth. However, the softening in new business applications could be a signal of caution, potentially reflecting a more guarded entrepreneurial sentiment.

It is important to note that the business environment, while improving, presents a mixed landscape with sectors like Basic Materials and Energy facing challenges. This sectoral divergence underscores the need for a nuanced understanding of the current economic climate. The contraction in the ISM manufacturing component for the fifth consecutive quarter provides a stark contrast to the expansionary services sector, suggesting a structural shift in the economy that merits close monitoring.

Market Research Analyst

From a market research perspective, the sustained strength in client revenue across most industries, as reported by Citizens, is a testament to the adaptability and strategic planning of businesses in a fluctuating economic climate. Consumer Services and Healthcare sectors being highlighted as top performers align with broader trends of an aging population and a consumer base that values experiences like travel and recreation.

The regional variance in business performance points to the importance of geographic diversification and the potential for regional economic policies to influence business outcomes. The idiosyncratic headwinds faced by businesses in certain geographies could be attributed to local factors such as regulatory changes, shifts in consumer behavior, or even climate-related impacts.

The analysis of the underlying components of the CBCI—jobless claims, ISM non-manufacturing and manufacturing components—provides a multi-faceted view of the business environment. The data suggests that while the service economy remains robust, manufacturing is lagging, which could have implications for policy decisions, particularly those related to trade and industry support.

Financial Analyst

Investors should consider the CBCI's indication of a moderating inflation environment and a resilient labor market as positive signals for market stability and potentially favorable conditions for equities, especially in sectors showing strength such as Healthcare and Consumer Services. The report's anticipation of Federal Reserve rate cuts could have significant implications for financial markets, as lower interest rates generally support higher valuations for stocks.

However, the mention of 'solid footing' should be tempered with the understanding that the economy is still facing significant uncertainties, including sector-specific issues and the potential for geopolitical tensions to disrupt markets. The resilience of Citizens' middle market and mid-corporate clients is a microcosm of the broader market's ability to withstand various challenges, but investors should remain vigilant and seek diversified portfolios to mitigate risks associated with any one sector or region.

Finally, the forward-looking statement regarding the potential for a 'soft landing' of the economy is crucial, as it suggests a managed deceleration that avoids a hard recession. This would be an ideal scenario for businesses and investors alike, but it is contingent upon numerous variables, including policy decisions and global economic trends.

Resilient labor market supports momentum into 2024

PROVIDENCE, R.I.--(BUSINESS WIRE)-- The national Citizens Business Conditions Index™ (CBCI) rose to 51.8 in the fourth quarter, supported by continued resilience in the labor market and consumer trends. The second consecutive quarterly reading above 50 indicates that the economy exited 2023 with momentum as signs of moderating inflation support optimism for a soft landing.

While applications for new businesses were slightly softer during the period, solid employment trends, particularly in Local Government and Healthcare, contributed to improving economic conditions in the fourth quarter. Citizens’ proprietary data on client revenue also remained strong across most industries. Healthcare and Consumer Services were once again among the top sectors, while the Basic Materials and Energy sectors faced headwinds during the period.

“The U.S. economy is entering 2024 on solid footing as the labor market has remained resilient and inflation has showed signs of normalizing,” said Eric Merlis, managing director and co-head of global markets at Citizens. “Moving forward, all eyes will be on the Fed and the timing and pace of rate cuts in the year ahead. We are working closely with our clients to help them navigate these changing circumstances and take advantage of them.”

The underlying components of the Index showed a moderate improvement in the business environment during the fourth quarter. Two of the five components provided a boost to the Index, while two were neutral and one weighed on the reading.

• Solid employment trends, as measured by initial jobless claims, were a tailwind.
• The ISM non-manufacturing component remained expansionary as consumers continued to spend on travel and recreational services.
• The revenue data of Citizens Commercial Banking clients varied across regions as businesses in some geographies faced idiosyncratic headwinds during the quarter.
• New business applications were marginally lower but remain elevated.
• The ISM manufacturing component was contractionary for the fifth consecutive quarter.

Overall, the fourth quarter CBCI revealed a business environment that is reverting toward its long-term growth trend. While operating conditions remain mixed, the reading provides an optimistic starting point for 2024.

“The fourth quarter CBCI shows a business environment that continued to improve despite ongoing challenges in the macro environment during the period,” said Merlis. “Citizens’ middle market and mid-corporate clients have remained resilient and, as we head into 2024, the tailwinds continue to be stronger than the headwinds.”

Citizens is a trusted strategic and financial adviser, consistently delivering clear and objective advice. The Citizens approach puts clients first by offering great ideas combined with thorough market knowledge and excellent execution, to help our clients enhance their business and reach their potential. For more information, please visit the Citizens website.

About Citizens Financial Group, Inc.
Citizens Financial Group, Inc. is one of the nation’s oldest and largest financial institutions, with $222.0 billion in assets as of December 31, 2023. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. Citizens helps its customers reach their potential by listening to them and by understanding their needs in order to offer tailored advice, ideas and solutions. In Consumer Banking, Citizens provides an integrated experience that includes mobile and online banking, a full-service customer contact center and the convenience of approximately 3,200 ATMs and approximately 1,100 branches in 14 states and the District of Columbia. Consumer Banking products and services include a full range of banking, lending, savings, wealth management and small business offerings. In Commercial Banking, Citizens offers a broad complement of financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, interest rate and commodity risk management solutions, as well as loan syndication, corporate finance, merger and acquisition, and debt and equity capital markets capabilities. More information is available at www.citizensbank.com or visit us on X (formerly Twitter), LinkedIn or Facebook.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240130039876/en/

Frank Quaratiello

617.543.5810

frank.quaratiello@citizensbank.com

Source: Citizens Financial Group, Inc.

FAQ

What was the CBCI in the fourth quarter?

The CBCI rose to 51.8 in the fourth quarter, indicating a strong economy.

Which sectors showed strong performance in the fourth quarter?

Healthcare and Consumer Services were among the top sectors, showing strong performance.

What was the performance of the ISM non-manufacturing component?

The ISM non-manufacturing component remained expansionary as consumers continued to spend on travel and recreational services.

What was the performance of the ISM manufacturing component?

The ISM manufacturing component was contractionary for the fifth consecutive quarter, indicating challenges in the manufacturing sector.