Economic sentiment posts its largest increase in weeks

Economic sentiment increased over the last two weeks, rising for the first time since mid-February and registering its largest increase since mid-January. The Penta-CivicScience Economic Sentiment Index (ESI) increased 1.4 points over the last two weeks to 35.9.

Four of the ESI’s five indicators increased over the past two weeks. Confidence in personal finances increased 2.8 points, rising to 56.0.

—Confidence in the overall U.S. economy increased 2.4 points to 39.0.

—Confidence in finding a new job increased 2.2 points to 38.6.

—Confidence in making a major purchase increased 0.7 points to 24.8.

—Confidence in buying a new home decreased 1.5 points to 21.0.

The U.S. Federal Reserve held interest rates steady at its meeting on Wednesday March 20. This marked the fifth consecutive meeting that the Fed maintained the current rate. In a statement, the Federal Open Market Committee stated that they do “not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

The Fed also released its quarterly economic projections on March 20. The “core” inflation measures—which measure prices excluding volatile food and energy prices—were revised to be 0.2 percent higher than what was projected in December. Officials also updated their projections for 2024 economic growth, forecasting growth of 2.1 percent in 2024, a 0.7 percent increase from 1.4 percent predicted in December 2023. The majority of Federal Officials signaled that they expect three cuts to the federal funds rate in 2024. However, officials signaled that they anticipate fewer cuts in 2025 and 2026.

Stocks surged following the Fed’s meeting, with the S&P 500, the Dow Jones Industrial Average, and the Nasdaq all closing at record highs on Wednesday, March 20. Barron’s reported that this marked the first time the three major indexes closed above their record values since 2021. This surge continued, with stocks again closing above record highs the following day on March 21, with the Dow ending the day just shy of $40,000.

The Commerce Department reported that retail sales increased by 0.6 percent in February. Meanwhile, January sales were revised from a 0.8 percent drop to a 1.1 percent decrease. This data does not take into account inflation. Retail sales, excluding sales from gas stations and auto dealers, increased by 0.3 percent.

The ESI’s three-day moving average began this two-week stretch at 35.2 on March 13 and then rose to a peak of 36.9 on March 15. It then oscillated between increasing and decreasing before falling to a low of 34.0 on March 24. The three-day moving average then climbed to 35.9 to close out the session on March 26.

The next release of the ESI will be Wednesday, April 10, 2024.