Community bankers have a bleak outlook on economic conditions, according to the latest Community Bank Sentiment Index (CBSI), released by the Conference of State Bank Supervisors (CSBS).
The index – designed to capture bankers’ sentiment on the economy — dropped to a score of 83 last quarter, which is two points below the previous quarter. It is also its lowest score since the survey began in 2019. Anything below 100 is a negative sentiment, with the lower the score, the more negative the outlook. Anything over 100 is a positive sentiment.
Of the seven components that the CBSI tracks, five of them decreased from the previous quarter. Most notably, 94 percent of community bankers believe the U.S. economy is currently in a recession. Among their top concerns for 2023 are government regulation, inflation, cyberattacks, and the cost/availability of labor.
“The fragile health of the economy coupled with multiple interest rate increases have been a drag on the CBSI for the past year. Interestingly, government regulation is creeping up as the top concern,” CSBS Chief Economist Tom Seems said.
The profitability component, with a score of 82, fell 18 points last quarter. The regulatory burden component dropped four points from last quarter to a score of 22. It has been below 28 for nine straight quarters.
The score related to the Federal Reserve’s monetary policy decisions was also low at 39 but rose slightly. Further, the score for the outlook for future business conditions increased to 51, from 37 the previous quarter.
The Conference of State Bank Supervisors (CSBS) is the national organization of bank regulators from all 50 states, American Samoa, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.