Economic sentiment marginally increases for the first time since January

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased by 0.1 points to 31.6, marking a respite from three months of consecutive declines in overall economic confidence.

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Three of the ESI’s five indicators increased during this period. Confidence in personal finances increased the most, rising 1.7 points to 49.0.

—Confidence in buying a new home increased 1.0 point to 22.8.
—Confidence in the overall U.S. economy increased 0.2 points to 34.7.
—Confidence in finding a new job decreased 0.8 points to 29.4.
—Confidence in making a major purchase decreased 1.4 points to 22.2.

The Commerce Department released its estimate of gross domestic product (GDP) for the first quarter of 2025, which showed that the U.S. economy contracted at an inflation-adjusted annual rate of 0.3 percent. This represents the first quarter that the economy has decelerated since 2022. The Commerce Department stated, “Compared to the fourth quarter, the downturn in real GDP in the first quarter reflected an upturn in imports, a deceleration in consumer spending, and a downturn in government spending that were partly offset by upturns in investment and exports.” Imports during the first quarter of this year rocketed up 41 percent, likely in response to rising tariffs imposed by the U.S. and retaliatory tariffs from abroad. However, imports do not negatively impact GDP, which is a measure of domestic economic production. Instead, according to an analysis by The Economist, the decline in GDP likely reflects measurement errors as well as households and firms replacing domestic consumption and investment with imports in order to front-load spending to avoid rising tariffs. 

The April Jobs Report showed that the economy added 177,000 jobs last month while the unemployment rate remained unchanged at 4.2 percent. These gains were well above the 133,000 jobs predicted by economists polled by the Wall Street Journal and reflected increases across health care, transportation and warehousing, financial activities, and social assistance. 

Additionally, the Commerce Department released the March personal consumption expenditures (PCE) price index which showed that inflation, excluding volatile food and energy prices, increased less than 0.1 percent from February to March and 2.6 percent year-over-year. This represents a deceleration from February, where core PCE increased 2.8 percent year-over-year. Meanwhile, consumer spending increased 0.7 percent from February.

Buoyed by strong jobs numbers, slowing inflation, and the prospect of new trade deals following President Donald Trump’s decision to pause his “retaliatory” tariffs, last week the stock market fully recovered the losses it endured in April amid volatility in U.S. tariff policies. Jeffrey Roach, chief economist at LPL Financial, told The New York Times, “If the labor market holds up and the Trump administration walks back the most egregious tariffs, the economy could skirt a deep recession.” 

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The ESI’s three-day moving average began this two-week stretch at 31.5 on April 23. It then trended downward to 29.0 on April 26 before rising to 31.2 on April 28. The three-day moving average then fell to a low of 28.7 on May 1 before rising to a high of 36.1 on May 6 to close out the session.

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The next release of the ESI will be on Wednesday, May 21, 2025.

Economic sentiment hits lowest point since 2022

The Penta-CivicScience Economic Sentiment Index (ESI) decreased 1.3 points to 31.5, its lowest recorded point since July 2022 amid the ongoing economic responses to tariffs.

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All five of the ESI’s indicators decreased during this two-week period. Confidence in personal finances decreased the most, falling 3.8 points to 47.3.

—Confidence in the overall U.S. economy decreased 1.1 points to 34.5.
—Confidence in buying a new home decreased 0.8 points to 21.8
—Confidence in making a major purchase decreased 0.7 points to 23.6.
—Confidence in finding a new job decreased 0.1 points to 30.2.

After the initial enactment of President Trump’s “reciprocal” tariffs at midnight on April 9, the tariff plan was later paused that day, bringing all tariffs to a universal 10 percent with the exception of China upon which the administration imposed a 145 percent tariff on the following day. Regarding this pause, President Trump acknowledged that the bond market was “getting a little queasy” as investors began to sell off not just stocks but also U.S. Treasury bonds.

In response to the U.S.’ 145 percent tariff, China imposed a 125 percent tariff on U.S. goods. U.S. Treasury Secretary Scott Bessent stated that neither China nor the U.S. “thinks the status quo is sustainable” and stated that he is anticipating a “de-escalation” in the trade tensions between the two nations.

In the days following the president’s temporary reversal of his “reciprocal” tariff plan, additional exemptions were granted for smartphones and other consumer electronics. The Trump administration has also discussed further measures to address U.S. competitiveness and foreign trade barriers to maritime shipping and shipbuilding, pharmaceuticals, semiconductors, and critical minerals. Additionally, the administration imposed tariffs as high as 3,521 percent on solar imports from Cambodia, Thailand, Vietnam and Malaysia.

In the wake of these tariffs, the International Monetary Fund (IMF) slashed U.S. growth projections for 2025 down 0.9 percentage point from its January forecast, projecting a growth rate of 1.8 percent. Importantly, this calculation is based on data available as of April 4, meaning it does not include the 90 day pause in tariffs. The IMF also reduced its global growth rate projection 0.5 percentage point to 2.8 percent. The IMF’s chief economist, Pierre-Olivier Gourinchas stated “The surge in policy uncertainty is a major driver of the economic outlook. If sustained, the increase in trade tensions and uncertainty will slow global growth significantly, reflecting this complexity.”

Leading U.S. economic figures also expressed uncertainty in the wake of these tariffs. JPMorgan Chase CEO Jamie Dimon stated “The economy is facing considerable turbulence… with the potential positives of tax reform and deregulation and the potential negatives of tariffs and ‘trade wars,’ ongoing sticky inflation, high fiscal deficits and still rather high asset prices and volatility.” Federal Reserve Chair Jerome Powell told the Economic Club of Chicago in a speech that, “Tariffs are highly likely to generate at least a temporary rise in inflation” and that slowing economic growth alongside rising inflation could cause stagflation, further complicating the Fed’s efforts to fulfill its dual mandate to achieve both maximum employment and stable prices.

The March Consumer Price Index (CPI) showed that inflation fell 0.1 percent month-over-month, marking the first time this metric has declined since May 2020. Meanwhile, year-over-year inflation rose 2.4 percent, cooling after rising 2.8 percent in the twelve months ending in February. These data are positive and a welcome sign to consumers in the face of high prices, though the Wall Street Journal notes that these data likely do not account for the tariffs, and that rather, tariffs will likely impact the April inflation report.

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The ESI’s three-day moving average began this two-week stretch at 31.9 on April 9. It then decreased to a low of 30.6 on April 10, oscillated, and then increased to a high of 32.4 on April 13. The three-day moving average then oscillated again before declining to 31.1 on April 22 to close out the session.

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The next release of the ESI will be on Wednesday, May 7, 2025.

Economic sentiment declines as tariffs mount

The Penta-CivicScience Economic Sentiment Index (ESI) decreased 0.3 points to 32.9, during a two-week stretch dominated by news coverage of President Donald Trump’s worldwide, “reciprocal tariffs.”

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Three of the ESI’s five indicators decreased during this two-week period. Confidence in buying a new home decreased the most, falling 1.6 points to 22.6. 

—Confidence in finding a new job decreased 0.8 points to 30.5.
—Confidence in the overall U.S. economy decreased 0.4 points to 35.9.
—Confidence in making a major purchase increased 0.5 points to 24.3.
—Confidence in personal finances increased 0.6 points to 51.1.

The news cycle over the past two weeks has paid extraordinary attention to tariffs and fears of a global trade war. On March 26, President Trump announced a 25 percent tariff on imported cars and car parts. The White House claimed that this move will strengthen U.S. manufacturing, though analysts at Morgan Stanley estimate that this tariff could raise the average car price for consumers by $6,000.

On April 2, President Trump declared “Liberation Day” for U.S. trade policy as he announced a 10 percent tariff on imports from all countries into the U.S. with additional sanctions on countries that have large trade deficits or other purported trade distortions with the U.S. Notably, goods from the European Union will face a 20 percent tariff and imports from China will face an additional 34 percent tariff. President Trump justified the tariffs, stating that “If you want your tariff rate to be zero then you build your product right here in America.” 

Following Trump’s “Liberation Day” announcement, many countries have signaled that they will impose retaliatory tariffs on the U.S. On April 4, China announced a 34 percent reciprocal tariff on the U.S., which led President Trump to threaten an additional 50 percent tariff against the country should it not withdraw its 34 percent reciprocal sanction. European Commission President Ursula von der Leyen offered a “zero-for-zero” tariff deal for industrial goods with the U.S. on April 7 to avoid a trade war. Von der Leyen stated, “We stand ready to negotiate with the U.S.” but also noted that retaliation is not out of the picture, stating, “We are also prepared to respond through countermeasures and defend our interests.”

The tariff news sent shockwaves through the economy. On Friday, April 4, the Dow Jones Industrial Average dropped 5.5 percent, and the S&P 500 closed 5.9 percent down. This marked the Dow’s largest decline since June 2020. Federal Reserve Chair Jerome Powell warned that new tariffs are, “significantly larger than expected” and that, “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.” This renewed economic uncertainty has reignited discussions about the possibility of a recession. Goldman Sachs raised its estimate of the likelihood that the U.S. will enter a recession in the next year to 35 percent, up from 20 percent. In contrast, the International Monetary Fund (IMF) expects a slowdown but does not anticipate a recession. IMF spokeswoman Julie Kozack stated that “Large policy shifts have been announced and the incoming data is signaling a slowdown in economic activity” but noted that, “[a] recession is not part of our baseline.”

In other economic news, the U.S. Bureau of Labor Statistics (BLS) released the March Jobs Report which showed that the labor market added 228,000 jobs in March, coming in well above economists’ predictions. Meanwhile, the unemployment rate ticked up 0.1 percentage points to 4.2 percent. BLS stated that this solid job growth can be attributed to gains in healthcare, social assistance, transportation and warehousing, and retail trade. 

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The ESI’s three-day moving average began this two-week stretch at 34.8 on March 26. It then oscillated between decreasing and increasing, flatlining at 32.1 on March 31 and April 1 before rising to a high of 35.0 on April 3. However, the three-day moving average then began declining precipitously in-line with the announcement of retaliatory tariffs by the U.S., hitting a low of 31.0 on April 8 to close out the session. 

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The next release of the ESI will be on Wednesday, April 23, 2025.

Economic sentiment continues its 2025 decline

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) fell by 0.3 points to 33.2. This marks the ESI’s fourth consecutive period of decline. 

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Two of the ESI’s five indicators decreased during this two-week period. Confidence in personal finances decreased the most, falling 2.9 points to 50.5.

—Confidence in the overall U.S. economy decreased 0.8 points to 36.3.

—Confidence in making a major purchase increased 0.2 points to 23.8.

—Confidence in finding a new job increased 1.0 point to 31.3.

—Confidence in buying a new home increased 1.4 points to 24.2

The Federal Reserve held interest rates steady within the range of 4.25 to 4.5 percent for a second straight meeting. In its statement, the Federal Open Markets Committee (FOMC) said, “Uncertainty around the economic outlook has increased.” Fed Chair Jerome Powell echoed this, saying that likely due to tariffs, “further progress may be delayed” on returning inflation to the Fed’s 2 percent target. FOMC members also raised their forecasts for core inflation this year while also predicting lower economic growth. Nevertheless, Fed officials continued to predict two rate cuts of 25 basis points each for this year.

The February Consumer Price Index (CPI) showed a lower-than-expected inflation rate of 2.8 percent. Both the overall CPI and the core CPI, which excludes volatile food and energy prices, increased by 0.2 percent for the month, falling slightly below economists’ forecasts. This moderation in price increases, particularly in shelter costs, suggests a positive trend in controlling inflation. However, uncertainties surrounding tariffs and their potential impact on prices remain a key concern.

The U.S. Census Bureau reported that retail sales rose just 0.2 percent in February, falling below the estimated 0.6 percent rise in sales projected by economists polled by The Wall Street Journal. January retail sales were also revised downward to a decline of 1.2 percent, the largest decline in monthly sales since 2021. Declining sales at department stores and bars and restaurants may indicate that consumers are cutting back on nice-to-have spending amidst broader economic uncertainty in the U.S.

On March 12, the European Union announced that retaliatory tariffs on U.S. goods would take effect on April 1. These tariffs are set to impact goods produced in Republican-leaning states, including Kentucky bourbon, agricultural products, jeans, and Harley-Davidson motorcycles. In response, President Donald Trump threatened a 200 percent tariff on wine and liquor from the EU. The EU’s tariffs were later delayed to mid-April with a European Commission spokesperson telling CNN that the delay was to ensure, “additional time for discussions with the U.S. administration.” 

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The ESI’s three-day moving average began this two-week stretch at 32.3 on March 12. It then rose consistently, hitting 33.8 on March 18 before trending downward to a low of 32.2 on March 21. The three-day moving average then rose and fell before rising again to a high of 34.1 on March 25 to close out the session.

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The next release of the ESI will be on Wednesday, April 9, 2025.

Economic sentiment declines amid escalating trade tensions

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) fell sharply by 1.4 points to 33.5, further deepening the ongoing downturn in consumer sentiment this year. 

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Four of the ESI’s five indicators decreased during this two-week period. Confidence in finding a new job decreased the most, falling 3.5 points to 30.3.

—Confidence in the overall U.S. economy decreased 2.1 points to 37.1.
—Confidence in personal finances decreased 1.6 points to 53.4. 
—Confidence in buying a new home decreased 0.1 points to 22.8.
—Confidence in making a major purchase remained unchanged at 23.6.

On March 3, President Donald Trump announced a 25 percent tariff on imports from Canada and Mexico, citing concerns over fentanyl trafficking and unauthorized immigration. This action prompted retaliatory tariffs from both countries. The president granted a one-month exemption to tariffs affecting the Big Three U.S. automakers—Ford, General Motors, and Stellantis—on March 5 and then a wider postponement of tariffs on imports from the U.S.’s neighbors on March 6.

Later on March 11, President Trump announced that the U.S. would be raising tariffs on steel and aluminum imports from Canada to 50 percent beginning March 12. This would have been in addition to previously planned 25 percent tariffs on steel and aluminum imports from all countries. However, the president reversed course later that day after Ontario agreed to halt its 25 percent export tax on electricity coming into Michigan, Minnesota, and New York. The original 25 percent tariff on steel and aluminum imports did, however, go into effect. 

The stock market has reacted negatively to these shifting U.S. tariff policies. By March 10, the S&P 500 had wiped all gains made since November 2024. ​Stocks slipped further on March 11, with the S&P 500 index falling by 0.76 percent, and the Nasdaq composite index dropping 0.18 percent, underscoring investor concerns about potential economic disruptions resulting from trade disputes.

The Federal Reserve Bank of Atlanta’s GDPNow estimate, a preliminary, real-time model that provides a running estimate of the current quarter’s growth in economic output based on available economic data, projected a slowdown in the U.S. economy for the first time this quarter on February 28. The model’s estimate for annualized gross domestic product (GDP) growth predicted a contraction of -1.5 percent on February 28, reflecting weaker-than-expected trade and consumer spending data. The estimate has since decreased further to -2.4 percent on March 6. If these estimates for negative GDP growth come to pass, it would be the first quarterly contraction of the U.S. economy since early 2022. In the wake of these data and broader economic uncertainty, President Trump declined to rule out a recession in 2025, telling Fox News’ Maria Bartiromo, “I hate to predict things like that. There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing… it takes a little time, but I think it should be great for us.”

The U.S. Bureau of Labor Statistics’ February Jobs Report reported that U.S. employers added 151,000 jobs last month, coming in slightly below economists’ expectations. The unemployment rate ticked upward slightly from 4.0 percent to 4.1 percent. Federal government jobs declined by 10,000 since the previous month, likely due to the federal hiring freeze. This reflects the first decline in federal employment since June 2022. Some analysts have noted, however, that job losses from the Trump administration’s efforts to reduce the federal workforce are not yet accounted for in the jobs report. 

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The ESI’s three-day moving average began this two-week stretch at 33.8 on February 26. It then rose slightly, hitting a high of 35.1 on March 1 before trending downward to 32.8 on March 3. The three-day moving average then rose back up to 34.3 on March 4 before falling again to a low of 32.3 on March 7. The average then rose slightly to 33.0 on March 11 to close out the session.

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The next release of the ESI will be on Wednesday, March 26, 2025.