Despite the risk of recession, Citizens Business Condition Index (CBCI) increased to 53.9 in the first quarter, Citizens announced on Tuesday.
Citizens Bank has multiple locations throughout central Pennsylvania and the Lehigh Valley.
The index rise reflects continued strength in the labor market, additional business openings, and positive corporate revenue trends. The first quarter bounce-back indicates a return to positive business conditions following a drop below 50 in the fourth quarter last year.
“The U.S. economy bounced back during the first quarter and, despite the disruption in the financial sector, there are several positive signs going forward such as improving inflation measures and still-strong labor numbers,” Eric Merlis, Citizens’ managing director and co-head of global markets said in a statement.
“Policymakers are still trying to thread the needle amid heightened recession concern, but companies that have made it through the pandemic and recent headwinds continue to prove their resiliency.”
Despite aggressive Federal Reserve rate hikes aimed at slowing the economy to curb inflation, the labor market has remained resilient. Citizens’ proprietary data on client revenue grew across industries during the first quarter with consumer services and health care among the top sectors due to their ability to pass on rising costs to customers.
The manufacturing sector slowed as higher borrowing costs impacted expansion by limiting capital expenditure.
The index showed improving dynamics in the business environment. Three of the five components listed below boosted the index level while one was neutral, and one weighed on the reading:
The trends capture a quarter where demand for goods was lower while demand for services was steady amid broader employment stability. CBCI’s first quarter rise revealed a business environment that is adapting to the year-long rate hike campaign from the Fed. The labor market’s strength continues to have a stabilizing effect on business.
Merlis said the first-quarter index indicated a business environment where activity has adjusted as interest-rate hikes seem to be working to curb inflation.
“The still-strong job market continued to be a source of support during the quarter,” said Merlis.