The national Citizens Business Conditions Index (CBCI) fell to 48.2 to start the year 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.

Labor markets and consumer trends remained resilient in the first quarter. However, Citizens’ proprietary data showed softening revenue trends during the period after solid performance across most industries in the second half of 2023. 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 Eric Merlis, managing director and co-head of global markets at Citizens.

The underlying components of the index reflected mixed dynamics in the business environment. One of the five components provided a boost to the Index, while one was neutral and three weighed on the reading.

• The ISM non-manufacturing component was expansionary as demand for services continued to be strong, boosting the Index.

• Employment trends, as measured by initial jobless claims, remained resilient and were neutral to the Index.

• New business applications declined, weighing on the Index, but remain elevated relative to pre-pandemic levels.

• The activity data of Citizens’ Commercial Banking clients also showed softening revenue trends after a strong fourth quarter.

• The ISM manufacturing component was contractionary for the sixth consecutive quarter. However, monthly data indicates some green shoots in the manufacturing outlook. The Index component turned positive in March for the first time since September 2022.

Overall, the first quarter CBCI reveals a business environment that is feeling the effects of a sustained period of higher rates.

“The first quarter index reading shows a business environment that is slowing as higher interest rates weigh on economic conditions,” said Merlis. “While concerns about inflation persist, the data provides evidence that tighter monetary policy is having its intended effect.”