4q citizens business conditions index report · the national citizens business conditions index™...
TRANSCRIPT
The national Citizens Business Conditions Index™ climbed from 60.2 to 61.0 in the fourth quarter amid robust consumer spending, easing trade tensions and a supportive Federal Reserve. The Index remains solidly above 50, a marker that key economic signs continued to be positive nationally and that business activity was strong among Citizens’ customers across the Northeast, Midwest and Mid-Atlantic. Though the domestic manufacturing sector contracted further in the quarter, the other inputs to the Index demonstrated health.
NATIONAL INDEX MOVED UP IN 4Q
The Index remained above 50, signaling that key economic measures were healthy on balance, including a gauge of business activity among Citizens’ clients.
Fourth-quarter Business Conditions Strengthened as Trade Risks Retreated
AN IMPROVING BACKDROP
Progress toward the first phase of a China trade deal, more clarity around Brexit, improved consumer spending and a stable rate environment took some of the uncertainty off the table for business leaders in the fourth quarter. Of course, this quarter the coronavirus is having an impact on certain sectors and markets, but the overall economic trend so far is still positive.”
- Tony Bedikian, Head of Global Markets
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4Q19 CITIZENS BUSINESS CONDITIONS
INDEX™ REPORT
51
49
53
55
57
59
61
63
2Q-2013
4Q-2013
4Q-2015
2Q-2015
4Q-2014
2Q-2014
4Q-2017
2Q-2017
4Q-2016
2Q-2016
4Q-2019
2Q-2019
4Q-2018
2Q-2018
Citizens Business Conditions Index™
Components:
ISM manufacturing
ISM service
Unemployment
Wage growth
Citizens’ data
EASING TRADE TENSIONS AND SUPPORTIVE FED
While the manufacturing sector reflected trade-policy headwinds, policymakers made progress in the fourth quarter toward a “Phase 1” agreement, which was indeed signed by both countries early in January. The Federal Reserve’s three interest-rate cuts over 2019 signaled its supportive stance, reassuring businesses.
STATE INPUTS SUGGEST THE EAST COAST AND MIDWEST BELOW NATIONAL TREND
The fifth component of the Index, the proprietary measure of activity among our commercial clients, revealed some regional trends. Our customers in the Midwest and Northeast posted higher quarterly activity, while the Mid-Atlantic ticked slightly downward. All three regions demonstrated slightly weaker conditions than we saw nationally.
On a state level, four states (out of 11 across our banking footprint) indicated a decrease in activity from the third quarter, while seven indicated growth. Customers in Connecticut and New Hampshire enjoyed the strongest growth, while Michigan and New Jersey had the weakest trend-lines.
BY INDUSTRY, ENERGY LED GROWTH
Our proprietary client data also displayed disparate trends by sector. Among commercial clients, we saw the most momentum among energy companies in the fourth quarter. The energy sector enjoyed rebounding activity as global growth looked to be stabilizing, which also pushed oil prices up over the period. Among laggards, government-sector clients posted the weakest results.
POSITIVE TRENDS GOING INTO 2020
The Citizens Business Conditions Index™ indicated that the commercial backdrop brightened slightly in the fourth quarter, aided by the strong employment market (at 50-year lows) and upbeat trends in the service sector. Compared to the third quarter, the Index demonstrated more uniform strength, supported by an accommodative Federal Reserve, improved consumer spending and retreating trade tensions. Despite the potential impacts from the outbreak of coronavirus early in the new year, a strong Index reading from the fourth quarter bodes well for the business backdrop as 2020 unfolds.
MANUFACTURING WEAKNESS OFFSET BY OTHER FACTORS
The fourth-quarter Index reading of 61.0 reflected a broadly positive state for businesses in the U.S. The Index is a function of five underlying components, most of which indicated strength in the period.
The weak point was manufacturing activity, which continued to slow. The Manufacturing Purchasing Manager’s Index (PMI) from the Institute of Supply Management (ISM) ticked downward again to 47.2 as the trade war between the U.S. and China enacted its toll. ISM readings below 50 reflect contracting activity.
Still, manufacturing weakness was offset by strength in the other four components of the Index. The ISM reading for the service sector moved higher from its September level of 52.8 to an even stronger 55.0 in December. Likewise, measures of unemployment, already healthy in the third quarter, remained unchanged, while wage growth trended higher.
SERVICE-SECTOR STRENGTH
The outlook brightened for service-sector companies over the fourth quarter.
The fifth component of the Index is a proprietary measure of business activity, tracking an assortment of metrics across our own commercial clients throughout the Northeast, Midwest and Mid-Atlantic. This measure moved higher from a healthy third-quarter reading, an additional sign that business conditions were favorable.
48
50
52
54
56
58
60
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ISM Non-Manufacturing PMI
Source: Institute for Supply Management
citizenscommercialbanking.com
Readings above 50 indicate expansion
4Q19 CITIZENS BUSINESS CONDITIONS INDEX™ REPORT
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