Citizens Business Conditions Index bounces back in Q1

The national Citizens Business Conditions Index (CBCI) rose to 53.9 in the first quarter, “reflecting continued strength in the labor market, more new business openings and positive corporate revenue trends.” 

The CBCI had 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,” Citizens said in its April 26 report. 

The labor market has remained resilient despite aggressive Federal Reserve interest- rate hikes aimed at slowing the economy to curb inflation, the banking company said. 

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 expenditures. 

“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, managing director and co-head of global markets at Citizens, said. “Policy-makers 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 surprises

The CBCI’s underlying components indicated “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. Citzens said.

Employment trends, which are measured 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 where demand for goods was lower while demand for services was steady amid broader employment stability, Citizens said. 

The first-quarter CBCI 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 businesses 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,” Merlis said. “The still-strong job market continued to be a source of support during the quarter.”

Citizens Financial Group, Inc., parent company of Citizens Bank, describes itself as “one of the nation’s oldest and largest” financial institutions with $222.3 billion in assets as of March 31.

Headquartered in Providence, Rhode Island, Citizens Bank offers retail and commercial- banking products and services to individuals, small businesses, middle-market companies, large corporations, and institutions. In consumer banking, Citizens provides mobile and online banking, a customer-contact center, and about 3,400 ATMs and more than 1,100 branches in 14 states and the District of Columbia. 

Citizens Bank ranks No. 11 in deposit market share in the 16-county Central New York region, with $1.1 billion in deposits and a 2.85 percent share of total market deposits, according to the latest FDIC data, as published in the 2023 Book of Lists.