Economic sentiment slightly increases as government shutdown continues

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased by 0.4 points to 31.3, remaining near an all-time-low as the government shutdown continues.

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Two of the ESI’s five indicators increased during this period. Confidence in the overall U.S. economy increased the most, rising 2.4 points to 32.0.

—Confidence in making a major purchase increased 0.9 points to 23.4.

—Confidence in buying a new home remained at 25.2.

—Confidence in finding a new job decreased 0.2 points to 26.7.

—Confidence in personal finances decreased 1.1 points to 49.2.

The federal government shutdown, now ongoing since October 1, poses potential risks to overall economic activity in the United States. A recent report from the Congressional Budget Office (CBO) found that after four weeks, the government shutdown has likely cost the U.S. economy $7 billion, a figure that could grow to $14 billion in permanently lost gross domestic product (GDP) if the shutdown hits eight weeks. The shutdown also continues to delay the release of key economic data, including the initial estimate for GDP for the third quarter of this year.

On October 29, the Federal Reserve lowered the target range for the federal funds rate by 0.25 percentage points to between 3.75 and 4 percent. Ten of the 12 voting members of the Federal Open Market Committee (FOMC) voted for the quarter-point cut, with Fed Governor Stephen Miran dissenting in favor of a half-point cut and Kansas City Fed President Jeffrey Schmid dissenting in favor of no cut at all. Heather Long, chief economist at Navy Federal Credit Union, told CNBC that two diverging dissents were “unusual” because one FOMC participant wanted a deeper cut and the other wanted to keep the rate steady.

During his press conference, Fed Chair Jerome Powell emphasized internal divisions over the path of monetary policy, signaling that a rate cut in December is not a “foregone conclusion” due to “strongly differing views about how to proceed.” He also noted how diminished data availability due to the ongoing government shutdown could lead the Fed to adopt a more cautious stance on further rate reductions.

Also on October 29, President Donald Trump announced a deal with China to temporarily lower certain tariffs on Chinese goods in return for China suspending export controls on rare earth minerals. Additionally, China committed to halting the flow of fentanyl precursors into the United States, ending harmful trade practices against U.S. semiconductor and other major firms. It also agreed to purchasing more U.S. soybeans and other agricultural exports.

Mortgage rates have dropped for the fourth straight week, with Freddie Mac reporting that the average 30-year fixed rate fell to 6.17 percent, its lowest level in over a year. Sam Khater, Freddie Mac’s Chief Economist, stated in a press release that “the last few months have brought lower rates and homebuyers are increasingly entering the market.”

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The ESI’s three-day moving average began this two-week stretch at 31.9 on October 22. It then fell to 29.9 on October 25, before steadily rising to 32.5 on October 28. After stabilizing for a couple days, the moving average fell to a low of 29.3 on November 1 before ending the session at a two-week high of 32.9 on November 4.

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The next release of the ESI will be on Wednesday, November 18, 2025.

Economic sentiment declines to its lowest point since July 2022

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) decreased by 1.0 point to 30.9, dropping below its previous low point in the weeks following the April 2025 tariff announcement. The index has now hit its lowest point since July 2022 amid continued economic uncertainty and the federal government shutdown.

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Three of the ESI’s five indicators decreased during this period. Confidence in making a major purchase decreased the most, falling 2.9 points to 22.5.

—Confidence in the overall U.S. economy decreased 2.3 points to 29.6.
—Confidence in finding a new job decreased 0.5 points to 26.9.
—Confidence in personal finances increased 0.2 points to 50.3.
—Confidence in buying a new home increased 0.6 points to 25.2.

The federal government shutdown, which began on October 1 and remains ongoing, may have lasting effects on the U.S. economy. An official from the Department of Treasury stated that the lost output generated because of the shutdown may cost the economy up to $15 billion per week, and analysis from Oxford Economics states that a shutdown will reduce GDP growth by 0.1 and 0.2 percentage points per week. The shutdown is also continuing to delay the release of key economic data, including the September Consumer Price Index report (CPI) which has now been rescheduled to October 24. 

The International Monetary Fund (IMF) released its World Economic Outlook (WEO) report, forecasting a slowdown in global growth to 3.2 percent in 2025, down from 3.3 percent in 2024. These 2025 projections represent an improvement from the IMF’s July predictions but are, in total, 0.2 percentage point below forecasts from late 2024. Meanwhile, the Fund projects U.S. economic growth will slow to 2.0 percent in 2025. IMF chief economist Pierre-Olivier Gourinchas noted that these data are “not as bad as we feared, but worse than we anticipated a year ago, and worse than we need.”

The Federal Reserve’s latest Beige Book report, which provides an anecdotal overview of the economic situation in the Fed’s 12 districts, found that economic activity “changed little” since the last report in early September. The Fed noted labor markets remained steady while price pressures intensified across many of the Fed’s 12 districts as tariffs contributed to rising costs. While some firms froze prices to retain customers, others fully passed on import costs, particularly in manufacturing and retail sectors. Recent analysis from Goldman Sachs found that American consumers will be most impacted by these tariffs, shouldering 55 percent of the new trade costs this year. Meanwhile, U.S. businesses will take on 22 percent of the costs, foreign exporters will absorb 18 percent, and five percent of the costs will be evaded.

Trade tensions between the U.S. and China have continued to escalate, as President Donald Trump stated on Truth Social he will impose an additional 100 percent tariff on Chinese goods starting November 1. This follows Beijing’s announcement of new export restrictions on products made with rare earth minerals, limiting the export products used for military applications and requiring foreign suppliers to obtain government approval to ship products essential in the semiconductor, AI, and EV industries. In response to China’s restrictions, the U.S. and Australia signed a minerals agreement committing more than $3 billion in combined government investments toward critical mineral projects over the next six months.

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The ESI’s three-day moving average began this two-week stretch at a high of 33.5 on October 8. It then fell to a low of 29.1 on October 11 before trending upward, climbing to 33.1 on October 17. The three-day moving average then oscillated over the following days, ending the session at 31.5 on October 21.

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The next release of the ESI will be on Wednesday, November 4, 2025.

Economic sentiment rises slightly as the U.S. government shuts down

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) rose by 0.2 points, from 31.7 to 31.9, at the start of the third quarter of 2025 and following the first government shutdown since 2019. 

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Three of the ESI’s five indicators increased during this period. Confidence in finding a new job increased the most, increasing 1.8 points to 27.4.

—Confidence in the overall U.S. economy increased 1.3 points to 31.9.

—Confidence in making a major purchase increased 0.3 points to 25.4.

—Confidence in buying a new home decreased 0.4 points to 24.6.

—Confidence in personal finances decreased 1.8 points to 50.1.

On October 1, the federal government formally entered a partial shutdown after Congress failed to pass needed appropriations bills to keep the government running. The Congressional Budget Office estimated that about 750,000 federal employees have been furloughed due to this lapse in funding and that many others are continuing to work without pay.  

The White House budget office has reportedly directed agencies to begin identifying and drafting potential reduction in force (RIF) plans—contingency measures that, if implemented, would extend beyond furloughs to include layoffs of federal employees during the government shutdown. The government shutdown is also delaying the release of critical U.S. economic indicators such as the September Jobs Report that was due to be released on October 3. If the shutdown continues, additional data such as the Consumer Price Index could also be delayed. This comes at a precarious time for the U.S. economy, as evidence of a potential slowdown in hiring has prompted the Federal Reserve to restart cutting interest rates. 

The Fed’s preferred inflation gauge, the core personal consumption expenditures (PCE) price index, held steady at 2.9 percent year-over-year in August, with a 0.2 percent monthly gain. The overall PCE rose 0.3 percent for the month, nudging annual inflation to 2.7 percent, while personal income and spending exceeded expectations at 0.4 percent and 0.6 percent respectively. Despite the Fed’s two percent inflation target, the data is unlikely to shift the central bank’s projected course of two more rate cuts by the end of 2025.

On September 25, the Bureau of Economic Analysis released their third estimate of second quarter real gross domestic product (GDP) for 2025, showing that real GDP increased at an annual rate of 3.8 percent. This reflects a 0.5 percentage point increase from the second estimate due to upward revisions for consumer spending. The overall increase in real GDP can be attributed to an increase in consumer spending and a decrease in imports, which were partly offset by a decrease in investment and exports.

On September 24, the U.S. Census Bureau released August residential sales data, showing a seasonally-adjusted annual rate of 800,000 sales of new single-family homes—20.5 percent above the July 2025 rate of 664,000. The seasonally-adjusted estimate of new houses for sale was 490,000—1.4 percent below the July 2025 estimate of 497,000. The median sales price of new houses sold in August was $413,500 (versus $395,100 in July), and the average sales price of new houses sold in August was $534,100 (versus $478,200 in July).

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The ESI’s three-day moving average began this two-week stretch at 32.8 on September 24. It then rose to a two-week high of 36.0 on September 26 and then steadily declined to a low of 28.9 on October 4, before rising again to 32.6 to close out the session.

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The next release of the ESI will be on Wednesday, October 22, 2025.

Economic sentiment decreases following interest rate cut

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) fell by 0.8 points, from 32.5 to 31.7, after the Federal Reserve cut interest rates by a quarter of a percentage point.

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Two of the ESI’s five indicators decreased during this period. Confidence in the overall U.S. economy decreased the most, declining 3.8 points to 30.6. 

—Confidence in finding a new job decreased 3.7 points to 25.6.
—Confidence in making a major purchase increased 0.3 points to 25.1.
—Confidence in personal finances increased 1.4 points to 51.9.
—Confidence in buying a new home increased 1.8 points to 25.0.

The Federal Reserve cut interest rates by a quarter of a percentage point at the September Federal Open Markets Committee (FOMC) meeting, lowering the new target range for the federal funds rate to 4 to 4.25 percent. The FOMC underscored that the final decision to cut rates came down to the slowing employment situation, stating, “The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.” Eleven of the 12 voting members of the FOMC voted for the quarter-point cut, with newly appointed Fed governor Stephen Miran dissenting in favor of a half-point cut.

In its Summary of Economic Projections, the FOMC signaled that additional interest rate cuts are still on the table for 2025, with nine officials anticipating two cuts by the end of the year. However, substantial divisions among FOMC participants were also apparent, as one Fed official indicated that rates will decline by 1.25 percent this year while another predicted interest rates would be hiked back up 0.25 percent by the end of 2025.

The Labor Department released the August Consumer Price Index (CPI) showing a 0.4 percent increase in overall inflation with a 0.3 percent rise in core inflation. Year-over-year, the CPI increased 2.9 percent, with core inflation rising 3.1 percent annually. These increases were primarily driven by rising shelter costs, which rose 0.4 percent in August. Prices for food (+0.5 percent), energy (+0.7 percent), and gasoline (+1.9 percent) also increased during the month. The data highlighted the difficulties the Fed faces in pursuing its dual mandate. 

Survey data from Freddie Mac showed that the average 30-year mortgage rate continues to decline, falling to 6.26 percent during the week ending September 18. This marks the lowest average rate since early October 2024. This decline has provided much-needed relief to both homebuyers and homeowners, reflected in recent data from Mortgage Bankers Association showing mortgage applications jumped nearly 30 percent in the week ending September 12, with refinances surging 58 percent.

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The ESI’s three-day moving average began this two-week stretch at 31.6 on September 10. It then decreased to its low of 30.2 on September 12. It then began to oscillate, rising and falling before increasing again to hit a 3-day high of 32.5 on September 17 through 19. It then fell again to 31.7 on September 23 to close out the session.

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The next release of the ESI will be on Wednesday, October 8, 2025.

Economic sentiment collapses ahead of the September Fed meeting

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) fell sharply by 2.2 points, from 34.7 to 32.5, ahead of the September meeting of the Federal Open Markets Committee (FOMC). 

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All five of the ESI’s indicators decreased during this period. Confidence in buying a new home decreased the most, declining 3.2 points to 23.2. This marks this indicator’s largest single-period loss in over a year.

—Confidence in the overall U.S. economy decreased 3.1 points to 34.4.

—Confidence in making a major purchase decreased 1.9 points to 24.8.

—Confidence in personal finances decreased 1.7 points to 50.5.

—Confidence in finding a new job decreased 1.3 points to 29.3.

The Commerce Department‘s latest personal consumption expenditures (PCE) price index showed that core inflation, which excludes volatile food and energy prices, rose 2.9 percent year-over-year, the highest annual rate since February. This increase to the Federal Reserve’s preferred inflation gauge was in-line with economists’ expectations. 

The Bureau of Economic Analysis reported its second estimate of inflation-adjusted gross domestic product (GDP) for the second quarter of 2025, which showed that the U.S. economy grew at a 3.3 percent annualized rate. The increase in real GDP reflected a decrease in imports and an increase in consumer spending, partly offset by smaller decreases in exports and investment. This figure was revised up by 0.3 percentage points from the initial estimate, reflecting upward revisions to investment and consumer spending, smaller decreases in government spending, and increases in imports.

The August Jobs Report showed a marked slowdown in the U.S. labor market, with just 22,000 new jobs added—well below expectations and the weakest monthly gain since the depths of the pandemic. Revised data revealed a net job loss in June, the first since December 2020, while unemployment ticked up to 4.3 percent, its highest level in nearly four years. Hiring declines were broad-based, particularly in manufacturing, construction, and business services, with gains narrowly concentrated in healthcare and social assistance. 

The Bureau of Labor Statistics‘ preliminary benchmark revision showed that new payroll growth in the year ending March 2025 was overstated by 911,000 jobs, potentially the largest downward revision on record. This adjustment cuts the previously reported average monthly job gains in half, suggesting the labor market was significantly weaker than believed and implying the slowdown seen in recent months began earlier than recognized. These data bolster expectations that the Federal Reserve will begin cutting interest rates at its next meeting, especially as Fed Chair Jerome Powell and other officials have already signaled concerns over rising labor market risks.

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The ESI’s three-day moving average began this two-week stretch at 33.5 on August 27. It then increased to its peak of 35.1 on August 30. It then began to oscillate, falling and rising before declining again to hit a low of 29.6 on September 7. It then began to rise again to 31.3 on September 9 to close out the session.

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The next release of the ESI will be on Wednesday, September 24, 2025.