PROVIDENCE – After gathering perhaps too much steam in summer and early fall, the state and national business climate cooled off slightly in the fourth quarter of 2021, according to Citizens Financial Group Inc.’s Quarterly Business Conditions Index.
Rhode Island fared better than the country, slipping in its quarterly index value by 1.6% to 56.32. This was also still 3.8% above the value for the fourth quarter of 2020.
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Learn MoreThe nationwide fourth-quarter index value of 54.35 marked a 6% decline over the prior quarter, and a 4% drop from the fourth quarter of 2020, Citizens said on Thursday.
Both state and national index values are still above 50, which is the threshold for expansion, according to Citizens. Eighty percent of the index is based on public data, such as ISM manufacturing and nonmanufacturing, unemployment and wage growth numbers. Twenty percent of the index is based on metrics related to the business activity of the bank’s commercial clients.
The quarter-over-quarter decline reflects inflation and health concerns from the new omicron variant, with supply chain problems adding volatility to an otherwise strong demand, according to Citizens.
“The vast majority of companies have successfully adapted to the pandemic. This quarter we started to see some overheating. That’s prompting an adjustment back to a more moderate pace of growth,” Eric Merlis, Citizens’ managing director of corporate risk solutions, said in a statement. “A slight pullback will help the supply chain continue to normalize and allow the labor market to keep adjusting, both of which are constructive for confidence levels.”
Still, many of the measurements used to calculate the index value showed growth, including an all-time high in the Institute for Supply Management’s nonmanufacturing index in November. The ISM manufacturing index also remained strong, with easing of supply chain and labor issues as of December.
These gains were offset in part by a slowdown in new business applications, which Citizens described as “an area of relative weakness” in the fourth quarter, although the company’s proprietary data suggested strong commercial banking client activity.
Excessive savings, which had been a key force behind high demand, also pulled back in the fourth quarter, suggesting consumers are returning to pre-pandemic behaviors.
Employment remained steady, with hiring activity driving down the unemployment rate as wage inflation increased.
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.