Citizens Business Conditions Index™ dips in Q2

Rising unemployment claims, slowing business formation weigh on results

Rapid interest rate increases to curb inflation continue to weigh on economic conditions, according to the national Citizens Business Conditions Index™ (CBCI), released today. A rise in unemployment insurance claims and a slowdown in small business formation caused the Index to dip to 48.5 in the second quarter.

While the labor market has started to show some softening in the face of aggressive Federal Reserve rate hikes and the manufacturing sector slowed given high inventory levels and a shift in consumption towards services, Citizens’ proprietary data on client revenue continued to be strong across most industries during the second quarter. Consumer Services and Healthcare continue to be among the top sectors due to their ability to pass on costs to customers.

“The overall U.S. economy has begun to slow in the second quarter even though Citizens’ middle market and mid-corporate clients continue to fare very well,” said Eric Merlis, managing director and co-head of global markets, Citizens. “The Fed’s tough medicine seems to be working and the rate of inflation is falling, with the labor market beginning to show some weakness and new business formation stalling.”

Relief from Inflation Surprises

The underlying components of the Index show the business environment is mixed as policy-makers try to thread the needle and curb inflation without too much collateral damage. Three of five components pulled down the Index level, while two were positive.

  • New business applications decreased in most states.
  • Initial jobless claims increased for the quarter and national employment numbers started to soften.
  • The ISM manufacturing index decreased as the sector is more sensitive to rising interest rates.
  • The proprietary activity data of Citizens’ commercial banking clients was broadly strong, suggesting that the conditions at many middle-market and mid-corporate businesses remain positive.
  • The ISM non-manufacturing component of the Index grew as consumers spent more on services and companies in these sectors were better able to pass on costs.

The second-quarter CBCI revealed a business environment that is struggling to adapt to the interest rate hike campaign from the Fed despite a pause in rate increases in June. Up until recently, the labor market has had a stabilizing effect as business conditions search for a new normal.

“The second-quarter CBCI shows a business environment where activity has slowed as interest-rate hikes seem to be working to curb inflation,” said Merlis. “All eyes will be on the job market to see if the Fed can balance its efforts to fight inflation while minimizing impacts on employment.”

Citizens is a trusted strategic and financial adviser, consistently delivering clear and objective advice. The Citizens approach puts clients first by offering great ideas combined with thorough market knowledge and excellent execution, to help our clients enhance their business and reach their potential. For more information, please visit the Citizens website.

About Citizens Financial Group, Inc.

Citizens Financial Group, Inc. is one of the nation’s oldest and largest financial institutions, with $223.1 billion in assets as of June 30, 2023. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. Citizens helps its customers reach their potential by listening to them and by understanding their needs in order to offer tailored advice, ideas and solutions. In Consumer Banking, Citizens provides an integrated experience that includes mobile and online banking, a full-service customer contact center and the convenience of approximately 3,400 ATMs and approximately 1,100 branches in 14 states and the District of Columbia. Consumer Banking products and services include a full range of banking, lending, savings, wealth management and small business offerings. In Commercial Banking, Citizens offers a broad complement of financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, interest rate and commodity risk management solutions, as well as loan syndication, corporate finance, merger and acquisition, and debt and equity capital markets capabilities. More information is available at or visit us on Twitter, LinkedIn or Facebook.


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