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A Citizens Bank quarterly report point to a slight improvement in the business conditions in the US during the third quarter, as inflation shows signs of easing and as the labor market and consumer spending continue to be strong despite the high interest rate environment.

The latest Citizens Business Conditions Index (CBCI) reported that the index moved up to 50.7 percent in the third quarter from the low of 48.5 percent in the second quarter, a signal of a “return to modest growth” in business conditions.

As per CBCI criteria, a reading of 50 percent and above indicates expansion and positive business activity for the next quarter. The index going below 50 percent tells of a negative business outlook for the next quarter.

In spite of the positive national data, business conditions in Massachusetts are seen to slow in the next quarter, with the local index declining to 48.68 percent in the third quarter versus 52.71 percent last quarter.

Citizens said this might be due to the local business community considering the impact of the Federal Reserve’s moves on the local economy.

The Federal Reserve decided to pause hiking rates in September and have a wait-and-see approach to the effect of the monetary policy on economic data. Citizens said new business applications and employment trends remained steady while operating conditions for small businesses generally improved.

Citizens said consumer spending nationally remained strong amid the inflation showing signs of moderation. Consumer services and healthcare remained the top industries with healthy business activities during the quarter, while the manufacturing industry continued to contract, albeit at a slower rate.

“The U.S. economy was resilient in the third quarter as inflation showed signs of easing despite continued strength in the labor market,” Eric Merlis, managing director and co-head of global markets at Citizens Bank, said in a statement. “While the operating environment remains fragile, Citizens’ middle market and mid-corporate clients continue to perform reasonably well.”

Merlis said that while economic conditions were mixed, the focus moving forward will be on policymakers “as they navigate a complex economic and geopolitical environment and attempt to walk the fine line toward a soft landing.”