New Hampshire rate rises 6.3% from pessimistic territory
Citizens Financial Group’s Business Conditions Index for New Hampshire rose 6.3 percent from the fourth quarter of 2022, reflecting the national trend of an economy that’s remaining in a strong position.
For the first quarter, Citizens said the index in New Hampshire stood at 51.28. In the second quarter of 2022, the New Hampshire index stood at 48.24 — the lowest level since the end of 2019 and start of 2020. An index over 50 points is positive business activity, according to Citizens.
Nevertheless, the New Hampshire numbers were lower than the nation as a whole, according to Citizens, whose national Business Conditions Index for the first quarter rose to 53.94, 6.9 percent higher than the fourth quarter of 2022.
The solid rise in the index reflects what the financial services company says is continued strength in the labor market, more new business openings and positive corporate revenue trends.
The national index also dipped below 50 during the fourth quarter of last year, and the bounce-back during the first quarter signaled a return to positive business conditions.
According to Citizens, the labor market has remained resilient despite aggressive Federal Reserve rate hikes aimed at slowing the economy to curb inflation. The company said proprietary data on client revenue grew across industries during the first quarter with consumer services and healthcare 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 expenditures, Citizens said.
“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 stillstrong labor numbers,” said Eric Merlis, managing director and co-head of global markets, Citizens. “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.”
Relief from inflation
The underlying components of the index showed improving dynamics in the business environment. Three of five components boosted the index level while one was neutral and one weighed on the reading:
• The proprietary activity data of Citizens’ commercial banking clients, a key component of the Index, was very strong across regions, suggesting that the conditions at middle-market and mid-corporate businesses remained positive.
• The ISM non-manufacturing component grew as consumers spent more on services, and companies in these sectors were more able to pass on any increased costs.
• New business applications increased, helping to boost the index.
• Employment trends, which are mea sured by initial jobless claims as an Index component, were flat for the quarter, but nationally the number of jobs gained overall was surprisingly high despite much-publicized corporate layoff announcements.
• The ISM manufacturing index decreased, as the sector is more sensitive to rising interest rates.
The mix of trends captures a quarter during which demand for goods was lower, while demand for services was steady amid broader employment stability.
The first-quarter index revealed a business environment that continues to adapt to the year-long rate hike campaign from the Fed. The strong labor market continues to have a stabilizing effect as business conditions search for a new post-tightening normal.
“The first-quarter CBCI showed a business environment where activity has adjusted as interest-rate hikes seem to be working to curb inflation,” said Merlis. “The still-strong job market continued to be a source of support during the quarter.”
