Economic sentiment slightly declined at the end of Q2

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) declined by 0.3 points from 33.7 to 33.4, marking a small dip in overall confidence over the past two weeks.

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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 1.8 points to 24.2.

—Confidence in buying a new home decreased 1.6 points to 24.5.

—Confidence in finding a new job decreased 1.3 points to 29.7.

—Confidence in personal finances increased 0.8 points to 52.3.

—Confidence in the overall U.S. economy increased 2.4 points to 36.5.

The Federal Reserve left interest rates unchanged at between 4.25 and 4.5 percent at the June Federal Open Markets Committee (FOMC) meeting, marking the fourth meeting in a row that it held rates steady. In its statement, the FOMC said  “uncertainty about the economic outlook has diminished but remains elevated” amid persistent inflation, solid economic growth, strong labor market conditions, and a low unemployment rate. In its Summary of Economic Projections, the FOMC signaled that interest rate cuts are still on the table, with eight officials anticipating two cuts by the end of 2025. Later in June, Fed Chair Jerome Powell told the House Financial Services Committee that he expects inflation to begin rising soon due to higher tariff rates and that the Fed is going to continue monitoring tariff impacts before cutting rates again.

The Bureau of Economic Analysis revised its estimate for this year’s first quarter real GDP down even further in its third estimate, showing that the U.S. economy shrank at an annual rate of 0.5 percent, in contrast to the 2.4 percent increase in GDP during the fourth quarter of 2024. The BEA cited a decline in net exports as the primary driver in the decrease in real GDP, likely the result of higher expected tariff rates, as well as a decrease in government spending.

Separately, on June 30, the BEA found that the U.S. net international investment position for the first quarter of 2025 was -$24.61 trillion, an improvement of $1.92 trillion from -$26.54 trillion during the fourth quarter of 2024. This change was attributed to financial transactions, as well as changes in prices and exchange rates due to the appreciation of foreign currencies against the U.S. dollar. The U.S. dollar has declined in value by 10.7 percent relative to other major currencies this year, the weakest start to a year since the U.S. left the gold standard in 1973. This has occurred in part due to uncertainty over U.S. tariff policy and decreased investor confidence in the dollar as the world’s reserve currency.

The U.S. Census Bureau reported that sales of new single-family houses in May 2025 decreased 13.7 percent month-over-month, down from 722,000 in April to 623,000 in May. This data comes in below the 695,000 sales predicted by economists polled by the Wall Street Journal and reflects a year-over-year decline of 6.3 percent. Meanwhile, the National Association of Realtors (NAR) reported that U.S. existing home sales in May increased 0.8 percent from April while year-over-year sales declined 0.7 percent. NAR Chief Economist Lawrence Yun attributed the “subdued sales” to “persistently high mortgage rates.”

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The ESI’s three-day moving average began the two-week stretch at 33.6 on June 18. It then climbed to 34.7 on June 19, then oscillated between rising and falling before decreasing to its lowest point of 32.6 on June 26. The three-day moving average then climbed to a high of 35.1 on June 29 before falling to 32.8 on July 1 to close out the session.

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The next release of the ESI will be on Wednesday, July 16, 2025.

Economic sentiment holds fairly steady

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) declined slightly by 0.1 points from 33.8 to 33.7, marking a minor dip in overall confidence over the past two weeks.

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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, falling 1.0 points to 34.1.

—Confidence in personal finances decreased 0.7 points to 51.5.

—Confidence in buying a new home increased 0.4 points to 26.1.

—Confidence in making a major purchase increased 0.5 points to 26.0

—Confidence in finding a new job increased 0.7 points to 31.0.

The May Consumer Price Index showed that inflation rose 0.1 percent during the month, cooling slightly after rising 0.2 percent in April. Year-over-year inflation increased 2.4 percent. The Bureau of Labor Statistics (BLS) stated that shelter was “the primary factor in the all items monthly increase,” rising 0.3 percent in May. Meanwhile, energy declined 1.0 percent during the month, primarily driven by declining gas prices. Separately, BLS told economists that staffing shortages forced the agency to rely more heavily on less precise price estimation methods for April’s data. The Wall Street Journal reported that these staffing shortages have led economists to question the “quality of recent and coming inflation reports.”

The May Jobs Report showed that the economy added 139,000 jobs last month, while the unemployment rate remained unchanged at 4.2 percent. While the jobs data reflects a slowdown in hiring from April—where the economy added a revised 147,000 jobs—these gains were higher than the 125,000 jobs predicted by analysts polled by the Wall Street Journal. However, the employment-to-population ratio fell to 59.7 percent, its lowest point since January 2022. BLS attributes May job growth to gains in health care, leisure and hospitality, and social assistance.

President Donald Trump doubled tariffs on aluminum and steel on June 3, increasing the levy from 25 percent to 50 percent. The President stated in an executive order that “the increased tariffs will more effectively counter foreign countries that continue to offload low-priced, excess steel and aluminum in the United States market and thereby undercut the competitiveness of the United States steel and aluminum industries.” 

New data from the Bureau of Economic Analysis showed that the U.S. trade deficit declined in April to $61.6 billion. Bloomberg reported that this marks the trade deficit’s lowest level since 2023 and represents a 55 percent decline from March, where the deficit hit $138.3 billion ahead of President Trump’s “Liberation Day.” An analysis from the Congressional Budget Office (CBO) found that new U.S. tariffs announced prior to May 13 would reduce the deficit by $2.8 trillion after adjusting for their tariffs’ negative impact on growth. CBO also finds that the tariffs would increase inflation by 0.4 percentage points in 2025 and 2026. 

On June 10, the World Bank slashed U.S. growth projections in half for 2025, projecting an expansion of just 1.4 percent, a substantial decline from the 2.8 percent growth that the U.S. economy experienced in 2024. The World Bank warned that if the 90-day pause of the “Liberation Day” tariffs expires on July 31 and the “reciprocal” tariffs come into effect, that it would result in “global trade seizing up in the second half of this year” and that it would be “accompanied by a widespread collapse in confidence, surging uncertainty, and turmoil in financial markets.”

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The ESI’s three-day moving average began the two-week stretch at 33.6 on June 4 and then climbed to a high of 35.6 on June 7. It then fell to 32.8 on June 10 before briefly climbing up to 34.5 on June 12. The three-day moving average then fell again, hitting a low of 31.9 on June 16 before rising to 32.7 on June 17 to close out the session.

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The next release of the ESI will be on Wednesday, July 2, 2025.

Economic sentiment declines slightly following last period’s large surge 

The Penta-CivicScience Economic Sentiment Index (ESI) decreased by 0.4 points to 33.8, marking a slight decline after a significant gain in the previous two-week period.

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Three of the ESI’s five indicators decreased during this period. Confidence in finding a new job decreased the most, falling 2.6 points to 30.3.

—Confidence in the overall U.S. economy decreased 0.8 points to 35.1.
—Confidence in making a major purchase decreased by 0.6 points to 25.5.
—Confidence in buying a new home increased 0.7 points to 25.7.
—Confidence in personal finances increased 1.3 points to 52.2.

On May 28, the U.S. Court of International Trade ruled that some of President Donald Trump’s “retaliatory” tariffs were illegal. However, less than 24 hours later, an appeals court paused that decision and is weighing the appeal. Until then, the tariffs that were part of the ruling, including the levies imposed on Mexico, Canada, and China for their alleged involvement in the fentanyl trade and the global tariffs paused in April, will remain in effect. Commerce Secretary Howard Lutnick stated that the “tariffs are not going away,” and that President Trump has multiple avenues not affected by that court ruling through which to impose tariffs.

Despite this, President Trump is moving forward with his tariff policies, with the tariff on foreign steel and aluminum set to rise to 50 percent on June 4, and a planned 50 percent tariff on European Union imports delayed until July 9 following a conversation with European Commission President Ursula von der Leyen.

As global economic pressures mount, the Organisation for Economic Co-operation and Development (OECD) has cut its U.S. growth forecast to 1.6 percent for 2025 and 1.5 percent for 2026, down from a 2.2 percent increase forecasted in March. The downgrade reflects the impact of U.S. tariffs, persistent policy uncertainty, and a shrinking labor force. In parallel, inflation is expected to rise to 3.2 percent, potentially nearing 4 percent by year-end. Still, the OECD notes that if trade barriers ease and investment rebounds, AI-driven productivity gains could position the U.S. for stronger long-term growth.

The Bureau of Economic Analysis (BEA) released its second estimate of gross domestic product (GDP) for the first quarter of 2024 showing that the overall U.S. economy shrank at an inflation-adjusted annual rate of 0.2 percent. This is an upward revision from the initial estimate which showed a 0.3 percent decline in GDP. Consumer spending in the first quarter was lower than initially reported, increasing only 1.2 percent rather than the initial estimate of 1.8 percent. 

Additionally, the BEA’s latest personal consumption expenditures (PCE) price index showed that inflation, excluding volatile food and energy prices, increased 0.1 percent in April and 2.1 percent year-over-year. This represents a continued deceleration as core PCE increased 2.6 year-over-year from February and then 2.3 from March. The report also indicated increased caution among consumers due to ongoing uncertainty with U.S. trade policies as consumer spending fell to only a 0.2 percent increase month-over-month and as personal savings jumped to 4.9 percent, the highest level in almost a year.

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The ESI’s three-day moving average began the two-week stretch at 34.0 on May 21, oscillating down and up before falling to a low of 32.5 on May 28. The ESI then began rising, hitting a high of 34.5 on June 1, before falling again, declining to 33.5 on June 4 to close out the session.

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

Economic sentiment surges after U.S.-China tariff deal

The Penta-CivicScience Economic Sentiment Index (ESI) posted its largest single-period increase since July 2024, rising 2.6 points to 34.2. This rebound comes after the United States and China agreed to a 90-day pause in additional tariffs, helping to reverse some of the ESI’s steady declines seen since the new year and return the index to levels close to those in late February 2025.

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All five of the ESI’s indicators increased during this period. Confidence in making a major purchase increased the most, rising 3.9 points to 26.1.

—Confidence in finding a new job increased 3.5 points to 32.9.

—Confidence in buying a new home increased 2.2 points to 25.0.

—Confidence in personal finances increased 1.9 points to 50.9.

—Confidence in the overall U.S. economy increased 1.2 points to 35.9.

On May 7, the Federal Reserve left interest rates unchanged at between 4.25 and 4.5 percent. In its statement, the Federal Open Markets Committee reiterated its commitment to lowering inflation and maximizing employment but stated that “Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.” Fed Chair Jerome Powell echoed this statement in a news conference, warning that “If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.”

Later, on May 12, the White House and China announced a trade agreement that effectively paused the ongoing trade war, surprising markets with deeper-than-expected tariff reductions. China lowered its tariffs on U.S. goods to 10 percent, while the U.S. set its tariffs on Chinese imports at 30 percent. The U.S. rate includes a reciprocal 10 percent to match China’s, plus an additional 20 percent levy tied to China’s alleged involvement in the U.S. fentanyl crisis. The announcement also included news that the two countries would continue talks over the following 90 days with the goal of achieving a longer-term deal. Stock markets rallied upon the news with the Nasdaq Composite rising 4.3 percent that day and the S&P 500 jumping 3.3 percent.

However, five days later on May 16, Moody’s downgraded the U.S.’ credit rating from “Aaa” to “Aa1,” the last of the major credit rating agencies to downgrade the U.S. from the highest possible credit rating. Moody’s stated, “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs” and that “The US’ fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns.”

The April Consumer Price Index (CPI) report showed that inflation increased 0.2 percent month-over-month while year-over-year inflation rose 2.3 percent, cooling slightly after rising 2.4 percent in the twelve months ending in March. This marks the CPI’s lowest annual increase since February 2021 and came in below economists’ expectations of 2.4 percent. Housing prices continued to be the driving force behind inflation as shelter prices rose 0.3 percent in April, accounting for more than half of the overall increase in the CPI.

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The ESI’s three-day moving average began this two-week stretch at 35.9 on May 7. It then decreased to a low of 31.8 on May 12 before rising rapidly following the U.S.-China trade deal announcement, hitting 35.6 on May 15. The three-day moving average then oscillated before hitting a high of 36.1 on May 19 and then declining to 34.6 on May 20 to close out the session.

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

Economic sentiment marginally increases for the first time since January

The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased by 0.1 points to 31.6, marking a respite from three months of consecutive declines in overall economic confidence.

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Three of the ESI’s five indicators increased during this period. Confidence in personal finances increased the most, rising 1.7 points to 49.0.

—Confidence in buying a new home increased 1.0 point to 22.8.
—Confidence in the overall U.S. economy increased 0.2 points to 34.7.
—Confidence in finding a new job decreased 0.8 points to 29.4.
—Confidence in making a major purchase decreased 1.4 points to 22.2.

The Commerce Department released its estimate of gross domestic product (GDP) for the first quarter of 2025, which showed that the U.S. economy contracted at an inflation-adjusted annual rate of 0.3 percent. This represents the first quarter that the economy has decelerated since 2022. The Commerce Department stated, “Compared to the fourth quarter, the downturn in real GDP in the first quarter reflected an upturn in imports, a deceleration in consumer spending, and a downturn in government spending that were partly offset by upturns in investment and exports.” Imports during the first quarter of this year rocketed up 41 percent, likely in response to rising tariffs imposed by the U.S. and retaliatory tariffs from abroad. However, imports do not negatively impact GDP, which is a measure of domestic economic production. Instead, according to an analysis by The Economist, the decline in GDP likely reflects measurement errors as well as households and firms replacing domestic consumption and investment with imports in order to front-load spending to avoid rising tariffs. 

The April Jobs Report showed that the economy added 177,000 jobs last month while the unemployment rate remained unchanged at 4.2 percent. These gains were well above the 133,000 jobs predicted by economists polled by the Wall Street Journal and reflected increases across health care, transportation and warehousing, financial activities, and social assistance. 

Additionally, the Commerce Department released the March personal consumption expenditures (PCE) price index which showed that inflation, excluding volatile food and energy prices, increased less than 0.1 percent from February to March and 2.6 percent year-over-year. This represents a deceleration from February, where core PCE increased 2.8 percent year-over-year. Meanwhile, consumer spending increased 0.7 percent from February.

Buoyed by strong jobs numbers, slowing inflation, and the prospect of new trade deals following President Donald Trump’s decision to pause his “retaliatory” tariffs, last week the stock market fully recovered the losses it endured in April amid volatility in U.S. tariff policies. Jeffrey Roach, chief economist at LPL Financial, told The New York Times, “If the labor market holds up and the Trump administration walks back the most egregious tariffs, the economy could skirt a deep recession.” 

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The ESI’s three-day moving average began this two-week stretch at 31.5 on April 23. It then trended downward to 29.0 on April 26 before rising to 31.2 on April 28. The three-day moving average then fell to a low of 28.7 on May 1 before rising to a high of 36.1 on May 6 to close out the session.

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The next release of the ESI will be on Wednesday, May 21, 2025.