Supply chain disruptions and labor shortages are continuing to hold back economic growth, but index readings released Monday show the Massachusetts economy in expansionary territory for a sixth straight quarter and four straight quarters of growth for the U.S. economy.
Citizens said its national Citizens Business Conditions Index finished the third quarter at 57.1, down from the second quarter reading of 57.4. The state economy's third quarter reading was 55, up from 53.1 in the second quarter. Readings above 50 reflect an economy in expansionary mode.
"Despite ongoing challenges from the pandemic, the third quarter was a period of strong demand across most sectors of the economy," Citizens said. "With the continued support of low interest rates and fiscal spending initiatives, most sectors seem to have established a healthy trajectory of growth. Concerns over higher inflation have increased, and the employment sector still has ground to cover to reach pre-COVID status."
The index draws from a pool of metrics, including manufacturing data, consumer spending, commercial banking data, initial jobless claims, commodity prices, and new business applications.
"Business activity is incredibly strong and confidence levels are quite high,” said Tony Bedikian, head of global markets at Citizens. "We haven't fully exited the pandemic yet, but at this stage most parts of the economy have established some normalcy given the benefit of vaccines and the fiscal and monetary stimulus that continue to provide support towards full recovery. Many companies are doing well and would be doing even better if it weren't for headwinds such as supply chain disruption and labor shortages."
The new index readings were released as House and Senate leaders on Beacon Hill gear up to put $3.65 billion in one-time funds to work across Massachusetts, part of efforts over the next few weeks to allocate large chunks of American Rescue Plan Act funds and the state's fiscal 2021 budget surplus.