The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased by 1.6 points from 33.1 to 34.7, driven upwards by a surge in confidence in the overall U.S. economy.
All five of the ESI's indicators increased during this period. Confidence in the overall U.S. economy increased the most, climbing 2.6 points to 37.5. This marks this indicator's largest single-period gain since November 2024.
—Confidence in buying a new home increased 2.3 points to 26.4.
—Confidence in major purchases increased 1.8 points to 26.7.
—Confidence in personal finances increased 0.7 points to 52.2.
—Confidence in finding a new job increased 0.4 points to 30.6.
Fed Chair Jerome Powell signaled that the Fed may be considering rate cuts, a notable shift after eight consecutive months of holding rates steady. Powell underscored the "new challenges" confronting the U.S. economy this year—including tariffs, a softening labor market, slower consumer spending weighing on GDP, and ongoing inflationary pressures—and stated that "the shifting balance of risks may warrant adjusting our policy stance." Powell noted that the labor market appears to be in a "curious kind of balance" with both slowing supply and demand of workers. He also addressed the impact of tariffs, noting that their effects on consumer prices "are now clearly visible," and adding that a "reasonable base case is that the effects will be relatively short lived—a one-time shift in the price level."
The Bureau of Labor Statistics (BLS) reported that the Producer Price Index rose 0.9 percent in July, the sharpest monthly increase since June 2022. Meanwhile, the index minus foods, energy, and trade services increased 0.6 percent, its largest gain since March 2022. Economists told CNBC that these data, combined with the CPI data released last period, suggest inflationary pressures are building in the economy, but consumers may not yet be feeling the impact, as businesses may be absorbing much of the higher costs stemming from tariffs.
Survey data from Freddie Mac showed that the average 30-year mortgage rate declined to 6.58 percent during the week ending August 14, a decline of five basis points from the previous week ending August 7. This marks the lowest average rate since October 2024. While the dip offers modest relief for prospective home buyers, rates continue to remain elevated compared to levels experienced over the last five years.
Meanwhile, data from the National Association of Realtors (NAR) showed that existing home sales rose 2 percent in July. This data came in above economists' expectations. NAR Chief Economist Lawrence Yun stated "The ever-so-slight improvement in housing affordability is inching up home sales." The uptick adds to hopes that falling mortgage rates could keep sales moving higher into August.
On August 21, the U.S. and the EU announced that they agreed on a trade framework. Under the terms, the U.S. will maintain its 27.5 percent tariff on EU automobiles until the bloc introduces legislation to cut duties on U.S. agricultural and seafood products, after which auto tariffs will drop to 15 percent retroactive to August 1. Nearly all European exports to the U.S. will face a 15 percent tariff, with exemptions for items like cork, aircraft, and certain pharmaceuticals, while steel and aluminum duties remain at 50 percent. The deal also includes EU commitments to invest heavily in U.S. sectors, purchase large amounts of U.S. energy and semiconductors, and work toward regulatory alignment on automobiles.
The ESI's three-day moving average began the two-week stretch at 33.5 on August 13. It then slightly decreased to a low of 33.3 on August 14 before increasing to its peak at 36.2 on August 16. It oscillated, decreasing to 33.5 on August 24 before increasing to 35.2 on August 25. It then decreased slightly again to 35.0 on August 26 to close out the session.
The next release of the ESI will be on Wednesday, September 10, 2025.