Economic sentiment rises following GDP growth despite mounting inflation

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased 2.1 points, following the release of strong first-quarter GDP data, despite inflation pressures and uncertainty at the Federal Reserve.

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All of the ESI’s five indicators increased during this period. Confidence in personal finances increased the most, rising 3.4 points to 50.9.

—Confidence in making a major purchase increased 2.8 points to 23.2.

—Confidence in the overall U.S. economy increased 2.7 points to 31.0.

—Confidence in buying a new home increased 1.3 points to 25.6.

—Confidence in finding a new job increased 0.2 points to 24.4.

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The Bureau of Economic Analysis’ advance estimate of real GDP showed that the U.S. economy grew at a 2 percent annual rate in the first quarter of 2026, up from 0.5 percent in Q4 2025. Business investment rose at a 10.4 percent annual pace during the quarter as spending increased across AI-related categories. Consumer spending grew more modestly at a 1.6 percent rate, easing from 1.9 percent in the prior quarter.

The Fed held the federal-funds rate steady at a range of 3.5 to 3.75 percent following an 8–4 vote at the April meeting of the Federal Open Markets Committee (FOMC). Governor Stephen Miran dissented in favor of a cut, while three regional Fed bank presidents opposed the decision due to language in the statement signaling a possible future rate cut, arguing instead that the next move could be either a hike or a cut. The statement cited “a high level of uncertainty about the economic outlook” tied to developments in the Middle East and noted that inflation remains elevated, “in part reflecting the recent increase in global energy prices.”

Prices rose 0.3 percent from February to March and 3.2 percent year-over-year according to  the core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge. Meanwhile, consumer spending increased by more than $195 billion during the month, fueled by spending on gasoline and energy goods. With energy prices rising amid the conflict in the Middle East, these pressures are likely to keep inflation elevated and continue to complicate the Fed’s path forward on interest rates.

Lastly, new home sales reached their fastest pace of the year in March, climbing to a 682,000 annualized rate, outpacing analyst predictions, as the median selling price decreased to a more than four-year low. That marks a 7.4 percent increase from February, reflecting notable month-over-month gain in single-family home sales. This increase is likely a signal of renewed momentum in the housing market despite ongoing affordability pressures, including an increase in mortgage rate from a recent low at the end of February.

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This period, the ESI’s three-day moving average saw sentiment ebb and flow, though it remained bounded between about 29 and 33 throughout the period. The three-day moving average started this two-week period at a low of 29.4 on April 22. It then rose to 31.9 on April 25 before decreasing to 30.2 the next day. The three-day moving average then rose to a high of 32.2 on April 28, held steady through April 29, then fell to 30.0 on May 3 before rebounding to 31.3 on May 5 to close the session.

The next release of the ESI will be on Wednesday, May 20, 2026.

Economic sentiment ticks up after Middle East ceasefire announcement

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased 0.4 points to 28.9, rising above the 13-year low in sentiment seen last period after a ceasefire to the Middle East conflict was announced.

Three of the ESI’s five indicators increased during this period. Confidence in the overall U.S. economy rose the most, increasing 2.1 points from 26.2 to 28.3.

—Confidence in making a major purchase increased 0.9 points to 20.4.

—Confidence in finding a new job increased 0.8 points to 24.2.

—Confidence in buying a new home decreased 0.7 points to 24.3.

—Confidence in personal finances decreased 1.0 point to 47.5.

Beginning April 8, the United States, Israel, and Iran agreed to a two-week conditional ceasefire that included reopening the Strait of Hormuz, a critical global energy transit route. Markets reacted immediately, with oil prices falling and equities rising on expectations of restored energy flows, underscoring the strait’s importance as roughly one-fifth of global supply passes through it. However, both countries claim that the ceasefire has been violated, and oil flows through the strait have still not resumed to pre-conflict levels. 

The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose 0.9 percent in March, bringing annual inflation to 3.3 percent, driven largely by a surge in energy prices tied to the Middle East conflict. Gasoline prices jumped 21.2 percent and accounted for most of the monthly increase, while overall energy costs rose 10.9 percent. In contrast, core inflation remained contained, with prices excluding food and energy increasing 0.2 percent on the month and 2.6 percent year-over-year, both below expectations. 

Existing-home sales declined 3.6 percent in March to a seasonally adjusted annual rate of 3.98 million, according to the National Association of Realtors (NAR), marking the lowest level since June 2025 and a weaker-than-expected start to the spring selling season. The drop reflects continued affordability constraints as mortgage rates rose back above 6 percent in March amid heightened economic uncertainty, dampening buyer demand despite earlier rate relief. NAR downgraded its 2026 sales forecast to 4 percent growth, down from 14 percent growth predicted in November, highlighting the sensitivity of housing activity to rate fluctuations. 

Retail sales rose 1.7 percent in March to $752.1 billion, according to the Commerce Department, exceeding analysts’ expectations for a 1.5 percent increase and marking the strongest monthly gain in more than three years. Higher gasoline prices primarily drove the increase, with sales at service stations rising 15.5 percent as energy costs tied to the Middle East conflict boosted overall spending. Excluding gasoline, retail sales increased 0.6 percent, reflecting more modest underlying demand and suggesting the strength may prove temporary as fuel costs remain elevated.

The ESI’s three-day moving average began this two-week stretch at 28.0 on April 8. It decreased to a low of 27.0 for the period on April 11 before climbing to 28.8 halfway through the session on April 15. Following another brief dip, the three-day moving average rose to a session high of 31.1 on April 19 before closing out the session at 30.4 on April 21.

The next release of the ESI will be on Wednesday, May 6, 2026.

Economic sentiment sinks further, reaching a new all-time low

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) fell by 1.0 point to 28.5, surpassing the prior record low from last period and marking the weakest level since the index began in 2013.

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Three of the ESI’s five indicators decreased during this period. Confidence in the overall U.S. economy and confidence in making a major purchase both decreased 2.7 points, down to 26.2 and 19.5, respectively.

—Confidence in personal finances decreased 1.1 points to 48.5.

—Confidence in finding a new job remained flat at 23.4.

—Confidence in buying a new home increased 1.4 points to 25.0.

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On April 2, the White House announced revised tariffs on steel, aluminum, and copper products. These rules apply a 50 percent duty on goods made primarily of these metals and a 25 percent rate on derivative products, with reduced tariffs for certain industrial and electrical grid equipment as well as products made abroad but with U.S. metals. Meanwhile, the White House also announced it would impose a 100 percent tariff on patented pharmaceutical imports, with lower initial rates for companies planning to onshore production. Additionally under the new rules, companies pursuing “most favored nation” pricing agreements and investing in U.S. manufacturing would receive exemptions, while certain trading partners would also face reduced rates.

The Bureau of Labor Statistics’ March Jobs Report showed the economy added 178,000 jobs, rebounding from February’s losses, while the unemployment rate edged down to 4.3 percent. The report stated that the gains were driven by healthcare, construction, and transportation and warehousing. Meanwhile, the labor force participation rate fell to 61.9 percent, its lowest level since late 2021 and potentially signaling that some individuals are stepping back from the job search.

AAA reported that the national average regular gasoline exceeded $4 per gallon for the first time since August 2022, noting that this is “ten cents higher than last week and $1.08 higher than a month ago.” AAA continued to state that “Crude oil prices have been surging, surpassing $100 per barrel, as the conflict in the Middle East continues and the Strait of Hormuz remains closed.”
Rising energy prices have prompted a wave of commentary from Federal Reserve officials, many of whom warned inflation is likely to rise and pointed to elevated uncertainty. Chair Jerome Powell noted the Fed may not be able to stay on the sidelines indefinitely, emphasizing, “We will eventually maybe face the question of what to do here…we don’t know what the economic effects will be.” New York Fed President John Williams highlighted uncertainty but added that the current policy is “well positioned” to balance risks, while Kansas City Fed President Jeff Schmid instead pointed to rate adjustments, stressing the need to “follow through with policy actions that validate” inflation expectations. San Francisco Fed President Mary Daly underscored the broader challenge, calling for flexibility and cautioning against overly precise forward guidance in an uncertain environment.

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The ESI’s three-day moving average began this two-week stretch at 28.7 on March 25. It then decreased slightly before rising to a high of 30.7 on March 29. The three-day moving average then trended downward, falling to a low of 26.5 on April 5 before rising up to 27.1 on April 7 to close out the session.

The next release of the ESI will be on Wednesday, April 22, 2026.

Economic sentiment hits lowest point in the ESI’s 13 year history

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) fell sharply by 1.4 points to 29.5, hitting its lowest point since the index began measuring public sentiment about the U.S. economy in 2013.

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Four of the ESI’s five indicators decreased during this period. Confidence in buying a new home decreased the most, falling 3.9 points to 23.6, marking this indicator’s largest decline since September 2025.

—Confidence in making a major purchase decreased 1.7 points to 22.2.

—Confidence in finding a new job decreased 1.0 point to 23.4.

—Confidence in personal finances decreased 0.3 points to 49.6.

—Confidence in the overall U.S. economy increased 0.1 points to 28.9.

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As the conflict in the Middle East stretches into a fourth week, Brent crude oil remained above $100 a barrel, signaling that markets still see meaningful risk to energy supply even after President Donald Trump said he’s considering “winding down” U.S. involvement in the conflict. The conflict has led Iran to close the Strait of Hormuz, an important chokepoint that transits 20 percent of oil consumed globally. The significance of the strait’s closure is spilling beyond oil prices and is feeding expectations of higher fuel, shipping, and fertilizer costs, which could add to inflation and complicate central banks’ ability to cut interest rates.

The Federal Reserve held the federal-funds rate steady at a range of 3.5 to 3.75 percent, following an 11–1 vote at the March meeting of the Federal Open Markets Committee (FOMC). In its post-meeting statement, the FOMC noted that economic activity continues to expand at a solid pace, while inflation remains somewhat elevated and uncertainty about the economic outlook has increased. Officials specifically cited the conflict in the Middle East, stating that “the implications of developments in the Middle East for the U.S. economy are uncertain” and emphasizing that the Fed will continue to assess incoming data and evolving risks before making further policy adjustments.

Freddie Mac reported that the average 30-year fixed mortgage rate rose to 6.22 percent in the week ending March 19, 2026, its highest level in three months. The rise adds to already severe housing affordability pressures by increasing borrowing costs for buyers and raising input costs for builders, particularly through fuel-intensive construction materials. Analysts told The New York Times that the Middle East conflict is unlikely to immediately change major household purchase decisions, but a prolonged disruption could further delay a housing-market recovery that had been expected as rates gradually eased from their October 2023 peak.

Wholesale prices rose more than expected in February, with the Producer Price Index (PPI) increasing 0.7 percent on the month, above forecasts for a 0.3 percent gain, and rising 3.4 percent on a 12-month basis, the highest annual rate since February 2025. Core PPI, which excludes volatile food and energy prices, increased 0.5 percent monthly and 3.9 percent annually. The increase was driven in part by higher services costs, as well as gains in food and energy prices, indicating that pipeline inflation pressures remain persistent even before fully accounting for recent energy market disruptions tied to the conflict in the Middle East.

Commerce Department data showed that retail sales declined 0.2 percent in January to a seasonally adjusted $733.5 billion, following flat growth in December and extending a broader trend of soft consumer spending. While the decline was less severe than analysts had expected, the report reflects continued pressure on household spending amid elevated inflation and a cooling labor market. Underlying data were mixed, with stronger performance in some control group categories, but economists noted that consumer spending has outpaced income growth in recent months, raising concerns about the sustainability of demand.

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The ESI’s three-day moving average began this two-week stretch at 31.2 on March 11. It then fell to 29.8 on March 14 before rebounding briefly, peaking at 30.7 from March 15 to 16. The average then began to fall again, hitting a low of 28.3 on March 18 before rising again, closing out the session at 29.6 on March 24.

The next release of the ESI will be on Wednesday, April 8, 2026.

Economic sentiment decreases following a worse-than-expected jobs report

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) fell by 0.7 points to 30.9, erasing the prior period’s gains and hovering near its one-year low.

Four of the ESI’s five indicators decreased during this period. Confidence in personal finances decreased the most, falling 3.1 points to 49.9. This marks this indicator’s largest decline since April 2025.

—Confidence in finding a new job decreased 0.6 points to 24.4.
—Confidence in the overall U.S. economy decreased 0.5 points to 28.8.
—Confidence in buying a new home decreased 0.3 points to 27.5.
—Confidence in making a major purchase increased 0.9 points to 23.9.

The February Jobs Report showed that total nonfarm payroll employment fell by 92,000, largely driven by strike-related losses in the health care sector. The decline was worse than expected. Economists surveyed by The Wall Street Journal had projected a gain of 50,000 jobs. The unemployment rate also ticked up to 4.4 percent. Diane Swonk, chief economist at KPMG U.S., stated that this report “illustrates how fragile the economy is on the labor market side,” and that “the labor market weakness that we had seen emerge last year has not completely abated.” This report also raises fresh questions about whether the Federal Reserve will adjust interest rates in order to uphold its dual mandate to promote maximum employment and stable prices.

Similarly, the Fed published the latest edition of the Beige Book, a collection of anonymous anecdotes from businesses and economic experts across the country summarizing local economic conditions in each of the Fed’s 12 districts. In February, seven districts reported slight to moderate economic growth, while five saw flat or declining activity. Labor markets were generally stable across seven of the districts, while wages rose in most districts and prices increased across all 12.

Additionally, the Bureau of Labor Statistics (BLS) reported that the Producer Price Index (PPI), a measure of wholesale inflation, increased 0.5 percent in January and 2.9 percent year-over-year. Excluding food, energy, and trade services, the index rose 0.3 percent for the month. Evidence of sustained rise in input costs for materials, transport, and labor across production chains could reinforce a cautious approach from the Fed as it weighs its next interest rate decisions.

Finally, oil prices are rising after the U.S. and Israel launched airstrikes against Iran. The conflict has caused disruption to the global energy market, with oil prices surging past $100 per barrel and retail gasoline prices jumping to $3.45 per gallon on March 9. Depending on how this conflict progresses, persistent volatility could further raise oil and gas prices and overall inflation. Patrick De Haan, head of petroleum analysis at GasBuddy, estimates that “the chance of the national average reaching $4 per gallon in the next month is now 80 percent.”

The ESI’s three-day moving average began this two-week stretch at 29.8 on February 25. It then oscillated between increasing and decreasing, rising to a high of 32.5 on March 3 before falling to a low of 28.2 on March 8. The three-day moving average stayed at 28.2 on March 9 before rising to 30.6 on March 10 to close out the session.

The next release of the ESI will be on Wednesday, March 25, 2026.