PROVIDENCE, R.I. – Citizens announced today that the national Citizens Business Conditions Index (CBCI) reached 59.5 for the first quarter of 2022, up markedly from 54.4 at the end of 2021 and reaching its highest level since Citizens began tracking the data in 2014, suggesting that lessons learned by businesses during the pandemic coupled with strong consumer demand were a potent combination.
The CBCI has been in expansionary territory (above 50) for six consecutive quarters, but the latest value exceeds even the first ‘reopening rebounds’ that emerged in early 2021 and signals that resilient businesses that streamlined operations during early waves of the pandemic were able to benefit from a super-charged post-Omicron bounce.
“Demand is still strong, leading to strong business conditions,” said Eric Merlis, managing director, Global Markets, for Citizens. “However, inflation is a major concern. It’s not just a strong economy that’s driving it — the pressures from supply-chain backlogs and the invasion of Ukraine have aggravated the situation. It’s a critical moment for policymakers to contend with all of these issues.”
Positive indicators regarding business conditions are reaching new heights just as uncertainty escalates in a number of areas. Inflation continues to move higher, posting a year-over-year pace of 8.6% in March, the highest level since 1981. Multiple factors aggravated price pressure, including COVID’s continued hold on critical production pipelines, especially in China, and the invasion of Ukraine by Russia. Against this backdrop, the Federal Reserve implemented a 25-basis point rate hike last month in its first tightening measure of this business cycle and market expectations for future rate hikes adjusted even higher.
All five components of the Index were additive in the first quarter, an atypical scenario even in other periods of robust business activity. Both the manufacturing and non-manufacturing indexes from the Institute of Supply Management (ISM) posted expansionary levels even though their readings were down from the fourth quarter.
Employment levels also boosted the Index reading. Initial jobless claims ticked downward, and job openings continued to eclipse the number of job seekers. Meanwhile, applications for new business formation were also strong.