Economic sentiment remains steady amid mixed economic signals

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) remained at 31.9 as consumers faced a complicated economic environment marked by steady interest rates, stubborn inflation, solid retail spending, and renewed tariff threats.

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Three of the ESI’s five indicators increased during this period. Confidence in making a major purchase increased the most, rising 0.8 points to 22.2

—Confidence in personal finances increased 0.6 points to 51.6.
—Confidence in buying a new home increased 0.1 points to 24.7.
—Confidence in finding a new job decreased 0.2 points to 27.2.
—Confidence in the overall U.S. economy decreased 1.2 points to 34

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The Federal Reserve held the federal-funds rate steady at 3.5 to 3.75 percent at its June meeting, marking the fourth meeting in a row without a change to rates. The 12–0 decision was the Federal Open Market Committee’s (FOMC) first unanimous vote since June 2025 and the first vote under new Fed Chair Kevin Warsh. 

Warsh put his imprint on the FOMC statement by streamlining it considerably, reducing much of the typical explanation for the rate decision and eliminating entirely any future signal about the Fed’s policy path. While the committee’s updated dot plot signaled the possibility of a rate hike this year, Warsh did not submit his own outlook, underscoring his belief that the Fed should not commit itself to a specific policy path. 

The core personal consumption expenditures (PCE) price index rose to its highest level since 2023, increasing 0.3 percent in May and 3.4 percent year-over-year. This is contrasted with U.S. retail sales data which increased 0.9 percent in May 2026, up from a revised 0.4 percent in April and 6.9 percent year-over-year. Together, these indicators suggest a complicated environment, with persistent underlying price pressures that remain over the Fed’s 2 percent inflation goal, and resilient consumer spending bolstered by tax refunds. 

U.S. President Donald Trump threatened to impose a 100 percent tariff on European countries that impose a digital services tax on U.S. companies. In a Truth Social post, the President stated, “This TARIFF will supersede Trade Deals made with the Country, whether implemented, signed, or not. Additionally, the 100% TARIFF will be immediately imposed, if they proceed.” This threat came the day after the Council of the European Union voted to remove import tariffs on many ​U.S. goods. On President Trump’s threat, a European Commission spokesperson stated, “Unilateral measures targeting such legitimate policies are unjustified. If pursued, the EU will respond swiftly and decisively to defend its rights and regulatory autonomy.”

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The ESI’s three-day moving average showed a choppy but ultimately positive trajectory over the two-week period. It began the two-week stretch at 31.9 on June 17, increased slightly, then fell to a low of 29.1 on June 21. The three-day moving average then trended upward, rising to a high of 35.9 on June 29 before falling to 34.5 on June 30 to close out the session.

The next release of the ESI will be on Wednesday, July 15, 2026.

Economic sentiment rebounds ahead of the June FOMC meeting

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased by 1.2 points to 31.9 ahead of the June FOMC meeting, following a better-than-expected jobs report and news of a deal between the U.S. and Iran to extend the ceasefire in the Middle East.

Four of the ESI’s five indicators increased during this period. Confidence in the overall U.S. economy increased the most, rising 4.3 points to 35.2.

—Confidence in finding a new job increased 1.1 points to 27.4.

—Confidence in making a major purchase increased 1.1 points to 21.4.

—Confidence in buying a new home increased 0.3 points to 24.6.

—Confidence in personal finances decreased 0.8 points to 51.0.

The May Jobs Report showed that total nonfarm payroll employment sharply increased by 172,000 jobs while the unemployment rate held steady at 4.3 percent. The increase exceeded expectations and included upward revisions to March and April payrolls, signaling continued resilience in the labor market even as consumers and businesses navigated elevated prices, geopolitical uncertainty, and expectations for continued monetary policy pressure.

The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index for May rose 4.2 percent from a year earlier, up from 3.8 percent in April, marking the highest annual inflation rate since April 2023. Much of the increase was driven by higher energy prices, which continued to reflect market pressure from the conflict in the Middle East and disruption around the Strait of Hormuz. Core inflation remained more contained, rising 2.9 percent annually, but the headline increase reinforced concerns that inflation could remain elevated heading into the June meeting of the Federal Open Markets Committee (FOMC).

Major stock indexes experienced sharp swings during the period as investors reacted to the jobs report, inflation data, and developments in the Middle East. Following the jobs report, stocks fell as markets reassessed the likelihood of higher-for-longer interest rates, with technology and AI-related stocks among the hardest hit. Markets then faced additional volatility after the CPI report reinforced concerns about energy-driven inflation. However, stocks rebounded sharply later following news that the U.S. and Iran had reached a deal to extend the ceasefire and lead to reopening the Strait of Hormuz.

These developments came ahead of the June FOMC meeting, the first under new Federal Reserve Chair Kevin Warsh. With labor market data remaining resilient, inflation moving higher, and energy markets still sensitive to developments in the Middle East, analysts generally expected the Fed to leave interest rates unchanged while signaling continued concern about inflation risks.

The ESI’s three-day moving average began the two-week stretch at a period low of 27.8 on June 3. It then increased to 32.6 on June 6 before dipping slightly to 31.4 on June 7. The three-day moving average then climbed to a period high of 35.4 on June 9 before declining to 29.0 on June 13. It then rose again to 31.3 on June 15 before falling slightly to 31.2 on June 16 to close out the session.

The next release of the ESI will be on Wednesday, July 1, 2026.

Economic sentiment ticks up slightly despite mounting consumer headwinds

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) ticked up slightly by 0.1 point to 30.7 despite rising inflation, elevated mortgage rates, and continued uncertainty in energy markets.

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Three of the ESI’s five indicators increased during this period. Confidence in personal finances increased the most, rising 2.8 points to 51.8.

—Confidence in buying a new home increased 0.6 points to 24.3.
—Confidence in the overall U.S. economy increased 0.5 points to 30.9.
—Confidence in finding a new job decreased 1.1 points to 26.3.
—Confidence in making a major purchase decreased 2.3 points to 20.3.

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The Bureau of Economic Analysis released its April Personal Consumption Expenditures (PCE) data, showing that the U.S. inflation rate accelerated at its fastest annual pace in three years as higher energy costs continued to weigh on consumers. The PCE price index increased 3.8 percent year-over-year, up from a 3.5 percent annual increase in March. Core PCE, which excludes food and energy, increased 3.3 percent year-over-year. Additionally, the personal saving rate fell to 2.6 percent, suggesting that households are increasingly drawing on savings to keep pace with higher prices.

Mortgage rates also remained elevated during this period, creating additional affordability challenges for prospective homebuyers. Freddie Mac reported that the average 30-year fixed mortgage rate increased to 6.53 percent during the week ending May 28, its highest level in nine months and up from 6.51 percent the week before. These higher rates weighed on the housing market during what is typically the busiest home-buying season of the year, with new home sales falling 6.2 percent in April to a seasonally adjusted annual rate of 622,000.

Oil prices remained volatile amid conflicting signals over U.S.-Iran ceasefire talks and the potential reopening of the Strait of Hormuz. On May 27, oil prices fell to roughly $89 per barrel following reports that a potential peace agreement could reopen the strait. However, prices climbed again soon after as markets weighed continued uncertainty over negotiations and the timeline for restoring normal shipping activity. Higher energy prices have contributed to broader inflationary pressure, complicating the Federal Reserve’s goal on interest rates and adding another source of strain for consumers and businesses.

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The ESI’s three-day moving average fell early in the period, rebounded, and then fluctuated before closing just below 31. It began the session at 30.1 on May 20 before declining to a low of 28.5 on May 23. It then rose to a high of 33.2 on May 27 before declining to 30.2 on May 30. The three-day moving average then oscillated before ending the session at 30.9 on June 2.

The next release of the ESI will be on Wednesday, June 17, 2026.

Economic sentiment dips as positive economic news fails to lift outlook

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) decreased 0.4 points to 30.6 despite the release of a strong jobs report, the confirmation of a new Fed Chair, and a U.S.-China trade and investment agreement.

Four of the ESI’s five indicators decreased during this period. Confidence in buying a new home and confidence in personal finances both decreased by 1.9 points, falling to 23.7 and 49.0 respectively.

—Confidence in making a major purchase decreased 0.6 points to 22.6.

—Confidence in the overall U.S. economy decreased 0.6 points to 30.4.

—Confidence in finding a new job increased 3.0 points to 27.4.

The U.S. economy added 115,000 jobs in April, almost twice as much as analysts predicted, with the unemployment rate holding steady at 4.3 percent. Healthcare, transportation, and retail trade led hiring, while federal government employment continued to decline. Austan Goolsbee, president of the Federal Reserve of Chicago, told CNBC that the report showed the labor market has been “pretty much stable for a year, year and a half,” but continued, “I characterize that we’ve been stable without being good.”

President Trump’s visit to Beijing this week—the first by a U.S. president since 2017—led to an agreement to establish a U.S.-China Board of Trade and a Board of Investment, two new bilateral institutions designed to manage commerce and investment between the world’s two largest economies. China’s commerce ministry also stated that the two countries had agreed “in principle” to tariff cuts and reduced restrictions on select agricultural goods and aircrafts. The agreements are preliminary and the new boards are not expected to be formally chartered until Xi’s planned visit to Washington this fall. 

Kevin Warsh was confirmed by the Senate on May 13 as the new Federal Reserve chair, in a 54-45 vote, the most divisive confirmation in history. Warsh steps in amid persistent inflation and heightened unemployment, with the April Consumer Price Index increasing 0.6 percent on a seasonally adjusted basis and 3.8 percent year-over-year, its highest level since May 2023 and driven largely by elevated energy prices. Investors largely expect the Fed to hold rates steady for the rest of the year.

The ESI’s three-day moving average fluctuated over the two-week period before closing just above 31. It opened at 30.3 on May 6 and climbed to a period high of 33.3 on May 10 before falling to a low of 28.4 on May 15. The three-day moving average then rebounded to 32.9 on May 18 before dropping to 31.2 on May 19 to close out the session.

The next release of the ESI will be on Wednesday, June 3, 2026.

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.