PROVIDENCE – Business conditions across both the nation and Rhode Island slowed in the first quarter of 2024 amid an environment that is feeling the effects of a sustained period of higher rates, according to Citizens Financial Group Inc.
The financial-services company on Tuesday reported that the national Citizens Business Conditions Index fell 17% from a year ago to 48.2, as business activity normalized from elevated levels in recent quarters. The reading below 50 indicates that economic momentum slowed during the first quarter against a backdrop of moderately restrictive monetary policy.
Rhode Island also saw its business environment decline from 57.75 last year to 47.76.
“The first quarter [index] shows a business environment that is slowing as higher interest rates weigh on economic conditions,” said Eric Merlis, managing director and co-head of global markets at Citizens. “While concerns about inflation persist, the data provides evidence that tighter monetary policy is having its intended effect.”
Labor markets and consumer trends remained resilient in the first quarter, according to the report. However, Citizens’ proprietary data showed softening revenue trends during the period after solid performance across most industries in the second half of 2024.
New business applications also fell compared to the fourth quarter, though they remain well above pre-pandemic levels.
“While the index shows business conditions dipping in the first quarter, the overall U.S. economy remains fairly healthy,” said Merlis. “Signs of normalization can help put the economy on a more sustainable trajectory moving forward.”
Citizens said the underlying components of the first-quarter index reflected mixed dynamics in the business environment. The nonmanufacturing component was expansionary, providing a boost to the index, as demand for services continued to be strong.
However, the manufacturing component was contractionary for the sixth consecutive quarter. But monthly data indicates some green shoots in the manufacturing outlook. The index component turned positive in March for the first time since September 2022.
Employment trends, as measured by initial jobless claims, remained resilient and were neutral to the index, while the activity data of Citizens’ Commercial Banking clients also showed softening revenue trends after a strong fourth quarter.
