Vermont Business Magazine Citizens announced on Friday that the National Index of Citizens’ Economic Conditions (CBCI) fell to 52.9 in the second quarter of 2022, down from the eight-year peak of 59.5 at the end of the first quarter, but extending the its series of seven consecutive quarters above 50, indicating continued growth conditions for businesses. Citizens has bank branches throughout Vermont.
Commercial activity remains healthy but is clearly cooling from the previous quarter. This could reflect a return of the economy to a more sustainable level or could indicate that conditions are set to deteriorate. Consumer inflation continued to trend higher throughout the quarter, reaching an annual pace of 9.1% in the June report. The Federal Reserve (Fed) raised interest rates twice during the quarter. The Treasury market sent a recessive signal as the gap between 2-year and 10-year bond yields fell below zero. Consumer sentiment hit new lows. However, spending remained stable as pent-up demand due to COVID restrictions continued to drive economic activity.
“We are seeing several cross-currents in the environment. Concern levels are high, but individual prospects are still good, “said Eric Merlis, CEO of Global Markets, Citizens.” Businesses are still growing and maintaining positive momentum and consumers are demonstrating resilience. markets that try to calibrate expectations with these conflicting signals “.
Citizens announced Friday that VT data in the most recent index of citizens’ economic conditions (CBCI) has fallen since last quarter (see table), but less than the national decline.
Three of the five components of the Index were additive in the second quarter, another sign of moderating activity after five out of five were positive in the first quarter. Both the manufacturing and non-manufacturing indexes of the Institute for Supply Management had an expansive trend. However, they also showed moderation from the first quarter. The manufacturing index peaked around the first quarter of 2021, when the COVID rebound was in full swing. The non-manufacturing index peaked in the fourth quarter of 2021.
The index saw the strengthening of the proprietary business of the bank’s commercial bank customers, another underlying component of the CBCI. In the period, however, requests to set up new businesses decreased, penalizing the CBCI and indicating a pause from the first quarter.
Meanwhile, employment developments were neutral for the period. This is particularly evident at a time when growth is slowing and recession fears have increased. After the unexpected contraction in GDP in the first quarter, a contraction in the second quarter could signal an economic recession, by the standard definition. A typical recession is accompanied by a weak labor market and higher unemployment, but the scenario could evolve differently in a context where the labor market is already struggling with a shortage of labor. If the United States experiences an “employment” slowdown, consumer activity could remain supported, rather than in a traditional recession.
Although the path of inflation is still uncertain, this level of entrepreneurial activity could prove sustainable. As policymakers continue to tighten monetary policy and as pressure on the supply chain eases, the outlook for inflation may be gradual moderation.
“Unsurprisingly, we are down from last quarter’s peak given the current market volatility and the Fed’s action to curb inflation,” Merlis added. “We may be at a sustainable level of business, but there are still headwinds that could push business down.”
The Index draws on public information and proprietary company data to establish a single view of trading conditions across the country. An index value greater than 50 indicates expansion and indicates positive business activity for the next quarter. For more information on the last quarter index, please visit here.
Prepare your business for a business cycle
Every business faces business lifecycle challenges and opportunities, but there are some strategies most businesses should consider in the face of a possible economic slowdown or slowdown.
Most companies have focused on becoming leaner during the pandemic, and many have raised excess capital so they can maintain liquidity.
Now, many mid-market and mid-sized companies are in a stronger position as they face another business cycle, but business leaders should still consider measures to prepare for further rate hikes and tame inflationary pressure.
Here are five tips from Steve Woods – EVP and Head of Corporate Banking:
- Diversify revenue streams
Diversifying revenue streams can help stabilize cash flows during a recession. One of the best ways to diversify your revenue streams is through a merger or acquisition. Look for a target that serves as an effective hedge if your market is disrupted.
- Review your current cash flow
A cash flow review should at least come back through the pandemic to demonstrate the resilience of your business and will provide you and your financial partners with an important insight into potential obstacles.
- Block costs when possible
Hedging solutions can help provide certainty in an environment of volatile interest rates and exchange rates. Hedging commodities can also freeze prices as a hedge against inflation.
- Distinguish between types of expenses
Maintenance expenses are how much the company is spending just to maintain the status quo. Growth expenses are new capital expenditures that will specifically lead to revenue growth or margin expansion.
- Adopt automated payment solutions
Reviewing financial processes and procedures such as billing and fine-tuning areas that can be improved will help streamline operations and avoid unnecessary costs.
There is a wide range of solutions for automating timely payments to help your business maximize cash flow.
Nationwide, the index fell to 52.9 in the second quarter of 2022, down from the eight-year peak of 59.5 at the end of the first quarter, but extending its streak to seven consecutive quarters above 50, indicating conditions of continuous growth for businesses. Commercial activity remains healthy but is clearly cooling from the previous quarter.
Previously, the Treasury market sent a recessive signal as the gap between 2-year and 10-year bond yields fell below zero. Consumer sentiment hit new lows. However, spending remained stable as pent-up demand due to COVID restrictions continued to drive economic activity. Today, the Federal Reserve can be expected to continue its campaign against inflation by aggressively raising interest rates at its meeting; tomorrow could bring news on GDP suggesting that the US economy has shrunk for the second consecutive quarter. Combined with this regional index, it is possible that the economy is returning to a more sustainable level or conditions are set to deteriorate.
29.7.2022. PROVIDENCE, RI – Citizens’ Bank