Citizens Business Conditions Index rose to 51.8 in Q4/23, supported by continued resilience in the labor market and consumer trends. The second consecutive quarterly reading above 50 indicates that the U.S. economy exited 2023 with momentum, with signs of moderating inflation supporting optimism for a soft landing.

While applications for new businesses were slightly softer during the quarter, solid employment trends, particularly in local government and healthcare, contributed to improving economic conditions. Citizens’ proprietary data on client revenue also remained strong across most industries. Healthcare and consumer services were once again among the top sectors, while the basic materials and energy sectors faced headwinds during the quarter.

“The U.S. economy is entering 2024 on solid footing, as the labor market has remained resilient and inflation has showed signs of normalizing,” Eric Merlis, managing director and co-head of global markets at Citizens, said. “Moving forward, all eyes will be on the Fed and the timing and pace of rate cuts in the year ahead. We are working closely with our clients to help them navigate these changing circumstances and take advantage of them.”

The underlying components of the index showed a moderate improvement in the business environment during Q4/23. Two of the five components provided a boost to the index, while two were neutral and one weighed on the reading.

• Solid employment trends, as measured by initial jobless claims, were a tailwind.
• The ISM non-manufacturing component remained expansionary as consumers continued to spend on travel and recreational services.
• The revenue data of Citizens Commercial Banking clients varied across regions as businesses in some geographies faced idiosyncratic headwinds during the quarter.
• New business applications were marginally lower but remain elevated.
• The ISM manufacturing component was contractionary for the fifth consecutive quarter.

Overall, the Q4/23 index revealed a business environment that is reverting toward its long-term growth trend. While operating conditions remain mixed, the reading provides an optimistic starting point for 2024.

“The fourth quarter CBCI shows a business environment that continued to improve despite ongoing challenges in the macro environment during the period,” Merlis said. “Citizens’ middle market and mid-corporate clients have remained resilient and, as we head into 2024, the tailwinds continue to be stronger than the headwinds.”