Economic sentiment picks back up after two consecutive drops

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) rose by 0.6 points to 31.6, reversing the downward trend of the previous two periods and bolstered by a one-year high in confidence in buying a new home.

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Three of the ESI’s five indicators increased during this period. Confidence in buying a new home increased the most, rising 2.8 points to 27.8.

—Confidence in finding a new job increased 0.8 points to 25.0.

—Confidence in personal finances increased 0.2 points to 53.0.

—Confidence in making a major purchase decreased 0.2 points to 23.0.

—Confidence in the overall U.S. economy decreased 0.5 points to 29.3.

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Late last week, the Supreme Court ruled that President Donald Trump cannot rely on the 1977 International Emergency Economic Powers Act to impose sweeping global tariffs. Despite this, trade uncertainty remains high, as the administration has moved to impose tariffs under other legal authorities—actions that could face further legal scrutiny. Questions also remain about the status of trade agreements negotiated under the previous tariff framework and the process for refunding an estimated $133 billion in collected duties. 

Mortgage rates continued to decline in February, with Freddie Mac reporting that the average 30-year fixed mortgage rate fell below 6 percent to approximately 5.99 percent, its lowest level since 2022. The decline has reduced borrowing costs for prospective homebuyers and contributed to a surge in refinancing activity. Data from the Mortgage Bankers Association’s survey for the week ending February 13 revealed that home loan refinancing applications are up over 130 percent higher from one year ago, even as pending home sales remained subdued.

The Bureau of Economic Analysis released its initial estimate for gross domestic product (GDP) for the fourth quarter of 2025 which indicated slowing U.S. economic growth in the final months of last year, with GDP increasing at an annual rate of 1.4 percent. This came in well-below economists’ predictions of a 2.5 percent gain. The slower pace of growth reflected a pullback in federal spending during the 2025 government shutdown and slower overall economic momentum relative to earlier quarters, even as personal consumption and business investment continued to contribute positively to growth. 

The U.S. economy added 130,000 jobs in January and the unemployment rate edged down to 4.3 percent, according to the Labor Department, marking a rebound after several weak months. However, annual revisions showed that the U.S. had nearly no job growth in 2025, with total gains for the year reduced to 181,000 and average monthly growth revised down to 15,000. January’s hiring was concentrated in health care, social assistance, and construction, while federal and financial sector employment declined. 

The Labor Department also reported that inflation eased in January, with the Consumer Price Index (CPI) rising 2.4 percent year-over-year, down from 2.7 percent in December, while core inflation edged down to 2.5 percent. Monthly price growth was softer than expected at 0.2 percent, as falling energy costs and moderating housing prices offset gains in some services. The combination of stabilizing employment and softer inflation provides near-term relief for the Federal Reserve, though tariff uncertainty and lingering core price pressures are likely to keep policymakers cautious about resuming rate cuts.

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The ESI’s three-day moving average began this two-week stretch at 31.5 on February 11. It decreased slightly to 29.7 on February 14 before rapidly climbing to a high of 35.6 on February 16. Following a period of steady decline, the three-day moving average dropped to a session low of 29.0 on February 23 before closing out the past two weeks at 29.9 on February 24.

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

Economic sentiment falls as confidence in finding a new job hits an all-time low

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) fell by 1.7 points to 31.0, continuing its sharp decline and hitting its lowest level since November 2025.

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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 3.9 points to 24.2, its lowest level in the ESI’s 12-year history.

—Confidence in the overall U.S. economy decreased 2.2 points to 29.8.

—Confidence in buying a new home decreased 1.5 points to 25.0.

—Confidence in making a major purchase decreased 0.8 points to 23.2.

—Confidence in personal finances remained flat at 52.8.

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The Federal Reserve held the federal-funds rate steady at 3.5 to 3.75 percent at its January meeting, marking the first pause since July and signaling reduced urgency to continue rate cuts. The decision passed 10–2, with two FOMC participants dissenting in favor of a quarter-point cut, reflecting continued division within the FOMC around current economic conditions and the path forward for monetary policy. Fed Chair Jerome Powell pointed to stronger recent growth data and signs that the labor market has stopped deteriorating, while inflation remains above the 2 percent target but no longer worsening. Officials indicated they intend to keep rates unchanged for an extended period unless labor market conditions weaken or inflation shows clearer progress.

Mortgage rates held steady in early February, with Freddie Mac reporting that the 30-year fixed-rate mortgage averaged 6.1 percent as of February 5, 2026, virtually unchanged from the prior week and down from 6.89 percent a year earlier. Freddie Mac Chief Economist Sam Khater noted that, “for the last several weeks, the 30-year fixed-rate mortgage has remained at its lowest level in years,” pointing to improving affordability and rising housing availability ahead of the spring sales season. While rates remain high by historical standards, their recent stability may ease near-term financing uncertainty for buyers and sellers. 

Over the last two weeks, the Commerce Department and the Labor Department have released key economic data from December 2025. Commerce Department data showed that retail sales were largely flat in December compared to November, missing expectations for the traditionally busy holiday shopping season. Meanwhile, data from the Labor Department showed that the producer-price index (PPI) increased by 0.5 percent in December, the biggest increase in five months. Taken together, the acceleration in PPI alongside flat retail sales complicates the inflation outlook, signaling upstream price pressures as demand appears to be leveling off.

The Dow Jones Industrial Average surged Friday, February 6, rising 2.47 percent and closing above 50,000 for the first time in history. This rally represented the index’s largest increase since May 2025 and was led by rebounds predominantly in the technology sector, underscoring the tension between optimism and concern around AI-driven tech growth and valuations.

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The ESI’s three-day moving average began this two-week stretch at 31.8 on January 28 before falling to a low of 29.9 on January 30. It then oscillated between rising and falling, trending upwards to a high of 32.1 on February 9. The three-day moving average then decreased, falling to 31.0 on February 10 to close out the session.

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

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.