Economic sentiment falls sharply amid U.S.-Europe trade tensions

Over the past two weeks, the Penta-CivicScience Economic Sentiment Index (ESI) fell by 2.1 points to 32.7, offsetting many of the gains recorded in the prior period as all five of its indicators declined.

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All five of the ESI’s indicators decreased during this period, reversing many of the gains from the prior period. Confidence in making a major purchase decreased the most, falling 2.8 points to 24.0.

—Confidence in the overall U.S. economy decreased 2.6 points to 32.0.

—Confidence in buying a new home decreased 1.9 points to 26.5.

—Confidence in personal finances decreased 1.9 points to 52.8.

—Confidence in finding a new job decreased 1.2 points to 28.1.

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Global investors sold off U.S. assets last week as escalating trade and geopolitical tensions triggered a renewed “sell America” trade. Following President Donald Trump’s threat to impose tariffs of up to 25 percent on several European countries over the U.S. bid to acquire Greenland, Treasury bond prices fell sharply and gold surged toward a record one-day gain, reflecting a broad flight to safe assets outside the U.S. American stocks also dropped more than 2 percent across major indexes, while volatility spiked to multi-month highs. 

U.S. assets rebounded, however, after President Trump said the U.S. had reached a framework for a future deal on Greenland and would not proceed with tariffs scheduled to take effect on February 1. U.S. equities posted their strongest gains in months, with the S&P 500 rising more than 1 percent, as investors interpreted the announcement as a reduction in near-term trade and geopolitical risk rather than a resolution of underlying issues. 

The Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures (PCE) price index, showed that consumer prices continued to rise at a moderate but persistent pace in late 2025, reinforcing signs that inflation has plateaued above the Fed’s 2 percent long-run target. Prices rose 0.2 percent in both October and November, leaving inflation up 2.7 percent and 2.8 percent year-over-year, respectively. While inflation is well below post-pandemic highs, goods prices have begun to reaccelerate following the introduction of new tariffs last spring, complicating the disinflation trend. 

The U.S. economy expanded at an annualized rate of 4.4 percent in the third quarter of 2025, its fastest pace in two years, according to an updated estimate from the Bureau of Economic Analysis. The acceleration—driven by strong consumer spending, rising exports, increased government outlays, and robust private investment—exceeded expectations of 3.3 percent growth. 

U.S. retail sales rose 0.6 percent in November to $735.9 billion, according to the Commerce Department, marking a rebound from October’s decline and outperforming analysts’ expectations of 0.4 percent growth. This jump in consumer spending, despite mounting economic uncertainties and a more cautious labor market, underscores the resilience of personal consumption, which continues to drive over two-thirds of the economy. 

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The ESI’s three-day moving average began this two-week stretch at 32.4 on January 14. It then decreased to a low of 32 on January 17 before eventually reaching a high of 33.5 on January 24, and ultimately closing out the past two weeks at 32.8 on January 27.

The next release of the ESI will be on Wednesday, February 11, 2026.

Economic sentiment begins 2026 with its largest increase since July 2022

Over the past two weeks, the Penta-CivicScience Economic Sentiment Index (ESI) posted its largest increase since July 2022, rising by 2.9 points to 34.8. This comes after a modest rise during the previous reading, where economic sentiment increased 0.5 points during the two-week period ending on December 30, 2025.

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All five ESI indicators increased during this period, building on gains posted by four of the five indicators in the prior period. In this period, confidence in personal finances increased the most, rising 4.3 points to 54.7.

—Confidence in finding a new job increased 3.0 points to 29.3.
—Confidence in buying a new home increased 3.0 points to 28.4.
—Confidence in making a major purchase increased 1.9 points to 26.8.
—Confidence in the overall U.S. economy increased 1.9 points to 34.6.

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The Bureau of Labor Statistics (BLS) released the December Consumer Price Index (CPI), showing that inflation rose 0.3 percent during the month and 2.7 percent year-over-year. This increase was primarily driven by shelter costs, which rose 0.4 percent in December. These data were relatively in line with November’s CPI, which showed that inflation increased 0.2 percent during the month and 2.7 percent annually. However, economists warned that inflation may have been understated in the November report due to collection issues during the shutdown. 

The BLS’ December Jobs Report showed that total nonfarm payroll employment increased by only 50,000 during the month, driven by increases in food services and drinking places, health care, and social assistance. Meanwhile the unemployment rate fell to 4.4 percent. Over the course of 2025, the economy added 584,000 jobs, or around 49,000 per month. In contrast, the economy added around 168,000 monthly jobs in 2024. Outside of the two most recent recessions, 2025 has recorded the slowest average monthly job growth in more than two decades.

Data from Freddie Mac showed that the average 30-year mortgage rate fell to a one-year low of 6.15 percent in the week ending December 31, offering modest relief to homebuyers heading into the new year. Yet with 30 million households, or 54 percent of primary mortgage holders, locked into rates at or below 4 percent, homeowners remain disincentivized to sell, suppressing housing market activity.

The Bureau of Economic Analysis released its initial estimate for gross domestic product (GDP) for the third quarter of 2025 which showed that real GDP increased 4.3 percent from July to September, coming in well-above economists’ predictions of 3.2 percent, primarily boosted by strong consumer spending. The report, which was initially set to be released on October 30 but delayed due to the government shutdown, points to surprising resilience in the economy despite persistent inflation.

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The past four weeks have been marked by fluctuations in the ESI’s three-day moving average. The moving average began at 31.8 on December 17. It then decreased to a low of 28.0 on December 20 before trending upward to 35.4 on December 26. The three-day moving average then fell again, decreasing to 31.4 on December 29 before increasing to a high of 36.8 on January 3. Finally, the three-day moving oscillated between increasing and decreasing, ultimately closing out the past four weeks at 33.0 on January 13.

The next release of the ESI will be on Wednesday, January 28, 2026.

Economic sentiment decreases as 2025 comes to a close

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) decreased by 0.6 points, from 32.0 to 31.4, marking a dip in overall economic confidence ahead of the new year. 

Three of the ESI’s five indicators decreased during this period. Confidence in the overall U.S. economy decreased the most, falling 2.2 points to 31.7.

—Confidence in finding a new job decreased 1.3 points to 26.2.
—Confidence in making a major purchase decreased 1.0 point to 22.3.
—Confidence in buying a new home remained at 24.3.
—Confidence in personal finances increased 1.5 points to 52.4.

At its December meeting, the Federal Reserve delivered a widely expected “hawkish cut,” lowering the federal funds target range rate by a quarter percentage point to a 3.5–3.75 percent range, despite divisions emerging over the path ahead. The decision was approved by the Federal Open Markets Committee (FOMC) in a rare 9–3 vote. Additionally, the committee’s updated dot plot, a chart showing where each FOMC participant expects interest rates to be in the future, signaled only one additional cut in 2026 and another in 2027. Fed Chair Jerome Powell emphasized that policymakers are, “well positioned to wait and see how the economy evolves”. Beyond the rate move, the Fed also announced it will resume Treasury purchases, beginning with $40 billion in T-bills this week, as officials navigate persistent inflation, mixed labor-market signals, and political scrutiny ahead of Powell’s term ending next year.

The FOMC stated that recent data shows the economy expanding at a moderate but slowing pace, with job gains weakening and unemployment edging higher through the fall. Inflation has continued to increase throughout the year and remains “somewhat elevated.” Uncertainty about the economic outlook is also elevated. Lastly, Fed officials noted that the risks to the job market are growing, meaning they’re now more worried about rising unemployment, reflecting softer hiring and early signs of labor-market cooling as businesses grow more cautious. 

The release of the delayed November jobs report showed a fragile labor market, with payrolls rising just 64,000 in November after a steep 105,000 decline in October. Unemployment climbed to 4.6 percent, its highest level in four years. November’s gains were narrowly concentrated — health care accounted for more than 70 percent of net job growth — while sectors such as transportation continued to shed workers. Average hourly earnings rose only 0.1 percent, reinforcing that wage pressures are not fueling inflation.

Additionally, the U.S. Census Bureau’s advance estimates for October showed retail and food services sales were essentially flat at $732.6 billion, though still 3.5 percent higher than a year ago, with gains driven largely by nonstore retailers and steady growth in food services.

The ESI’s three-day moving average began this two-week stretch at 33.5 on December 3. It then decreased, falling to a low of 28.8 on December 9. The three-day moving average then steadily increased to a high of 33.8 on December 14 before decreasing to 32.5 on December 16 to close out the session.

Due to the New Year’s holiday, the next release of the ESI will be on Wednesday, January 14, 2026.

Economic sentiment rises ahead of the December Fed meeting 

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) rose by 1.4 points, from 30.6 to 32.0, ahead of the December meeting of the Federal Open Markets Committee (FOMC).

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Four of the ESI’s five indicators increased during this period. Confidence in finding a new job increased the most, climbing 3.0 points to 27.5.

—Confidence in personal finances increased 1.8 points to 50.9.

—Confidence in making a major purchase increased 1.7 points to 23.3.

—Confidence in the overall U.S. economy increased 0.8 points to 33.9.

—Confidence in buying a new home decreased 0.6 points to 24.3.

Following the end of the government shutdown, federal statistical agencies have begun issuing key economic data from the past few months after several months’ delay due to the lapse in government funding.

The Bureau of Labor Statistics (BLS) issued the delayed September Jobs Report on November 20, which showed that the economy added 119,000 jobs—well above the 50,000 predicted by economists—and the unemployment rate ticked up to 4.4 percent. Later, on November 25, BLS released the September Producer Price Index (PPI), finding that prices for final demand goods, excluding food, energy, and trade services, increased by 0.1 percent in September and 2.9 percent annually. Also on November 25, the U.S. Census Bureau released the estimates of U.S. retail and food services sales in September. Overall, retail and good sales were $733.3 billion, up 0.2 percent from August, and up 4.3 percent from September 2024.

Data from the National Association of Realtors (NAR) showed that existing home sales in October rose 1.2 percent from the previous month to a seasonally adjusted annual rate of 4.1 million, its highest level since February. Year-over-year sales increased 1.7 percent. “Home sales increased in October even with the government shutdown due to homebuyers taking advantage of lower mortgage rates,” said NAR Chief Economist Lawrence Yun.

On December 9 and 10, the Federal Reserve (Fed) will hold the final FOMC meeting of 2025 to determine whether to reduce interest rates for the third time this year. A Wall Street Journal analysis found that FOMC voters are divided on the path forward for monetary policy. This is due, in part, to the dearth of timely economic data caused by the government shutdown. Following the last FOMC meeting, Fed Chair Jerome Powell likened the lack of economic data to “driving in the fog” and stated that a December cut is “not a foregone conclusion.”

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The ESI’s three-day moving average began this two-week stretch at 30.2 on November 19. It then decreased, falling to a low of 29.0 on November 21. The three-day moving average then trended upward, rising to a high of 34.2 on November 29 before dipping to 32.5 on December 2 to close out the session.

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The next release of the ESI will be on Wednesday, December 17, 2025.

Economic sentiment declines again to its lowest point since July 2022

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) decreased by 0.7 points to 30.6 as the longest government shutdown in U.S. history ended on November 12. The ESI declined past the previous yearly low of 30.9 (from two periods ago) to reach the lowest level recorded since July 2022.

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Four of the ESI’s five indicators decreased during this period. Confidence in finding a new job decreased the most, falling 2.2 points to 24.5.

—Confidence in making a major purchase decreased 1.8 points to 21.6.
—Confidence in buying a new home decreased 0.3 points to 24.9.
—Confidence in personal finances decreased 0.1 points to 49.1.
—Confidence in the overall U.S. economy increased 1.1 points to 33.1.

Despite ending, the consequences of the shutdown are expected to continue to affect the overall U.S. economy, according to the International Monetary Fund (IMF). Julie Kozack, an IMF spokesperson, stated that while the shutdown will negatively affect the economy, it is expected that the impact will be reversed by the first quarter of 2026. Kozack highlighted that “The U.S. economy has proven to be resilient in the past few years” but that “We do now see strains starting to mount.” 

Additionally, the shutdown has delayed key economic data releases, complicating economists’ ability to assess the U.S. economy. While the September Jobs Report is now scheduled for release this week, it remains uncertain whether the October Jobs Report will be released. White House Press Secretary Karoline Leavitt stated the October Jobs Report is likely never to be released, but Kevin Hassett, director of the White House National Economic Council, later clarified the report will be released, though without the unemployment rate.

In recent weeks, President Donald Trump has rolled back tariffs on certain agricultural and textile products. In an executive order, the president exempted food products, such as coffee, tea, certain fruits, beef, and some fertilizers from reciprocal tariffs. Additionally, the U.S. is working to finalize trade agreements with Ecuador, Argentina, Guatemala, and El Salvador. These agreements, which are anticipated to be finalized in the next couple of weeks, will reduce tariffs on a variety of goods, including food, textiles, and apparel.

Mortgage rates increased slightly over the last two-week period, rising twice after five consecutive weeks of decline. Data from Freddie Mac shows that the average 30-year mortgage rate increased to 6.24 percent during the week ending November 13. Despite this increase, rates remain around their yearly low, offering some relief to homebuyers. Indeed, data from the Mortgage Bankers Association shows that purchase applications rose 6 percent week-over-week, its strongest pace since September.

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The ESI’s three-day moving average began this two-week stretch at a high of 32.9 on November 5. It then trended downward, falling to a low of 28.8 on November 10. The three-day moving average then rose back up to 32.0 on November 14 before falling to 30.0 on November 16. Finally, it rose to 31.2 on November 18 to close out the session.

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The next release of the ESI will be on Wednesday, December 3, 2025.