Business Conditions Improving

Economic conditions showed definite signs of improvement during the third quarter of 2020, the first gain during a year dominated by pandemic challenges. The Citizens Business Conditions Index rose to 61.2 at the end of Q3, up from 60.3 at the end of the second quarter, with some sectors, such as manufacturing, faring better than others as the U.S. economy started to get back on track.

Citizens’ proprietary measure of business activity among its clients showed particular strength in the industrial and government services sectors. The fourth quarter may pose continued challenges for some sectors, however, as the number of COVID-19 cases rises in many states.

“It’s obvious to everyone that life is not back to normal in the United States with the ongoing battle to contain COVID-19. Still, businesses are proving to be incredibly resilient,” said Tony Bedikian, head of global markets at Citizens. “The support from the Fed has been a huge factor. The capital markets are operating well and we are seeing a lot of effective adjustments made by small and medium-sized companies as the government weighs possible additional stimulus.”

The Index is derived from a number of underlying components, most of which improved during the third quarter.

• The Institute for Supply Management (ISM) Manufacturing and Non-Manufacturing Indexes were up for the quarter. Manufacturing rose more sharply while the broader services sector recovery held steady.
• Employment increased during the third quarter, but wage growth decreased, impacted by the growing rate of job gains in the lower-wage workforce.
• Proprietary measures of business activity among Citizens’ more than 7,000 clients across the United States were down slightly with a few sectors improving and others still languishing.

The Index draws from public information and proprietary corporate data to establish a unique view of business conditions across the country. An index value greater than 50 indicates expansion and points to positive business activity for the next quarter.