Citizens: Business climate dips below recession line as rate hikes take hold

BUSINESS CONDITIONS dipped into recessionary territory in the fourth quarter of 2022, marking the first time in eight quarters, according to Citizens Financial Group Inc's Quarterly Business Conditions Index. /PBN FILE PHOTO

PROVIDENCE – Growth mode is over, at least for now.

Citizens Financial Group Inc. on Tuesday reported that fourth-quarter business conditions nationwide and in Rhode Island have dipped into the recessionary territory for the first time in two years.

Aggressive interest rate hikes are finally taking hold, cooling sentiments about the economy and beginning to drive down inflation, according to the latest Quarterly Business Conditions Index. 

“This quarter was a turning point for sentiment as we saw heightened impact from the Fed’s policy actions,” Eric Merlis, managing director and co-head of global markets for Citizens, said in a statement. “This process is ongoing, but reducing inflation remains at the top of the economic agenda.”

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Indeed, national business conditions slid 13.4% compared to the prior quarter, reaching 48.54 – just below the 50-value threshold considered expansionary.

In Rhode Island, where economic conditions had already begun to deteriorate, the quarter-over-quarter change was less staggering. The latest 49.86 value as of Dec. 31 marks a 3.5% decline over the prior quarter, and again, just below the expansion line.

While the bond market hints at recession, the strong labor market could offer some stability for businesses in the “post-tightening new normal,” according to Citizens.

Another bright spot: consumer activity remains strong, with “healthy spending” in travel and recreation, according to Citizens. That’s partly thanks to employment numbers, which have eased “modestly” but remain strong overall despite an initial rise in jobless claims.

Unemployment and wage growth numbers are among the public data sources used to develop the index, along with ISM manufacturing and nonmanufacturing numbers. Twenty percent of the index is based on metrics related to the business activity of the bank’s commercial clients. 

Non-manufacturing activity continues to grow, although it softened in December amid extreme weather that hampered travel plans and created power interruptions, according to Citizens. Manufacturing is seeing fewer new orders amid declining demand, which is helping drive down inflation while also easing supply chain backlogs.

Middle-market businesses show signs of strength, according to Citizens’ proprietary data. Across industries, energy and utility companies led performance, fueled by higher demand from international conflict.

Nancy Lavin is a PBN staff writer. You may reach her at

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