Latest news with #EconomicPolicyUncertainty
Forbes
21-05-2025
- Business
- Forbes
Cutting Through The Noise: Trump's Chaos Slows Economy
Massive economic uncertainty went along with less spending on cars. Economic policy chaos reigns high. This massive jump in uncertainty over tariffs, federal layoffs, the cuts to already appropriated federal funds, potentially soaring deficits and the future path of interest rates, among others, is already taking a toll on the economy. Consumers and businesses are changing their spending habits, contributing to a noticeable slowdown in the economy. It all starts with economic policy uncertainty, created by President Donald Trump and his administration. Most of this policy uncertainty pertains to tariffs. Consumers and businesses are worried about rising inflation, fewer jobs and less economic growth. Consumers and businesses can theoretically respond in different ways, but all of their reactions will ultimately result in less economic activity. It is no surprise that economic policy uncertainty has dominated people's minds. The Economic Policy Uncertainty index, created by researchers at the University of Chicago, Northwestern University and Stanford University, reached its highest level on record, dating back to 1985, in April 2025. Uncertainty has grown by 377.1 percent from its recent low point in October 2024 and stood 29.7 percent above its most recent record from May 2020 amid an ongoing once-in-a-century pandemic. Chaotic economic policymaking has been worse in terms of economic uncertainty than a global public health disaster. Let's start with consumers to understand the toll that uncertainty could take. Households could spend less to build up savings for future drops in incomes such as cuts in hours, fewer bonus payments, and even layoffs. Alternatively, households could use their current incomes and savings to buy things that could become more expensive in the future. Even if consumers spend more now out of fear of higher inflation, they will still spend less in the future. The longer term result stays the same: households will spend less money. The most recent data show that households already pulled back in their spending. That is, the first response – less spending and more saving – dominated the second – more spending out of fear of inflation. Household spending on cars and car parts dropped by 11.1% in the first quarter of 2025, the largest decline since the third quarter of 2021, the heyday of supply chain bottlenecks. Households also lowered their spending at restaurants and instead spent more on food at home during that time. On the other hand, some consumers spent more, possibly because out of fear of more inflation. For example, households increased their spending on recreational vehicles by 7.0% in the first three months of this year. In the end, though, larger spending bumps did not halt the slowdown in consumer spending. Total consumption spending grew only by 1.8% in the first quarter, down from 4.0% at the end of 2024. Businesses could theoretically also initially react to the onslaught of uncertainty in contradictory ways. They could build up inventories, which would boost economic growth, and they could hold off on new, large, longer-term investments such as factories. In the end, though, even a build up of inventories could portend future economic slowdown since businesses spend money in the near term to avoid higher costs (and more spending) in the future. The most recent data on business spending indicates that businesses seem indeed worried about what the future, thanks to tariffs, will bring. They rapidly built up inventories in the first quarter of 2025. Those investments added 2.3 percentage points to economic growth. Put differently, the economy would have shrunk by 2.6% without the added increases in inventory spending. At the same time, though, business spending on structures such a factories was more or less flat, with investments on manufacturing plants falling by 4.3%. Admittedly, that drop came from rather high levels, but the manufacturing building boom may have come to an end amid the threats of global tariffs. The auto industry is one area where consumers and businesses pulling back seem to come together. Spending on new cars dropped by 6.9% in the first quarter and the aggregate number of hours that workers worked in auto manufacturing dropped by 1.5% in April 2025 alone and was 4.5% percent lower than a year earlier. Car companies appear to have cut back on the number of people they employ and the number of hours that they need people to work for. Less consumer spending seems to have already reduced working hours in car manufacturing. In the end, the massive uncertainty may be taking a toll on people's livelihoods before the tariffs, federal layoffs and spending cuts are fully in effect. Heightened economic policy uncertainty undoubtedly hurts the economy. The uncertainty of what may happen alone is enough to slow economic activity. Things do not actually have to happen for consumers and businesses to worry about the future and pull back on their spending, slowing economic activity. When the bad things that people feared will eventually happen, things will likely get worse. Instability and uncertainty are sometimes unavoidable, as in the case of a pandemic, but this time around, all of the uncertainty is deliberate and all of the economic pain is self-inflicted.
Yahoo
15-04-2025
- Business
- Yahoo
What soaring uncertainty means for the U.S. economy
President Donald Trump's tariff agenda has thrown the financial world for a loop for much of the past month. The on-again, off-again trade escalation with other nations — most notably China — has upended markets with investors fleeing U.S. stocks in search of more stable ground. And as experts and business leaders say the lack of clarity around the tariffs is every bit a challenge as the levies themselves, data shows economic uncertainty is the highest it has been in years. Economists have a way of quantifying economic chaos, as multiple measures show just how uncertain the market and the economy in general are. One measure, the Economic Policy Uncertainty index from researchers at Stanford and Northwestern universities, uses an analysis of news reports, tax code data and economic forecast disagreement. According to the EPU index, uncertainty spiked in March to levels last seen during the Covid pandemic. Kevin L. Kliesen, an economist at the St. Louis Federal Reserve, noted that the change in uncertainty from last spring to this spring is the sharpest such increase in almost 40 years. 'It's a historically unprecedented increase,' Kliesen said. The instability makes it harder for companies and consumers alike to make decisions, and it can be a scene-setter for recessions. 'Firms will delay investment in response to higher uncertainty,' Kliesen said. 'Consumers facing higher uncertainty about job prospects, they might cut back on spending.' Menzie Chinn, a professor of public affairs and economics at the University of Wisconsin, said, 'People are maximally confused.' To show how uncertainty plays out, Chinn gave an example of potential homebuyers: Lowering interest rates might entice them, but worries about a big drop in home prices over the next year — the kind that might arise from a recession — might scare them away. 'It's better news, but washed out by this bad uncertainty,' Chinn said. The uncertainty extends into the bond market: Government bonds are being sold more than they're being bought — even as stocks sour, flouting historical trends. Traditionally seen as a safe harbor, bonds tend to be purchased by investors when markets are on edge. That's not the case today, with 10-year Treasury yields surging above 4.5%. As overall stability is eroding, any news — even if it's inaccurate or positive — has the potential to send things haywire. U.S. stocks soared briefly on April 7 when an errant headline on X said Trump was considering a pause, only to sink when the White House said the claim was false. And while the market took off after Trump dialed down most tariffs Thursday, stocks faltered the next day. Prominent business leaders have warned about the uncertainty in recent weeks, with both JPMorgan Chase CEO Jamie Dimon and BlackRock CEO Larry Fink saying the lack of clarity is pushing the economy closer to recession. 'We have the strongest economy in the world. It would be good not to add to the uncertainty out there,' Dimon said Wednesday on Fox Business, adding that a recession is now a 'likely outcome.' This article was originally published on
NBC News
14-04-2025
- Business
- NBC News
What soaring uncertainty means for the U.S. economy
President Donald Trump's tariff agenda has thrown the financial world for a loop for much of the past month. The on-again, off-again trade escalation with other nations — most notably China — has upended markets with investors fleeing U.S. stocks in search of more stable ground. And as experts and business leaders say the lack of clarity around the tariffs is every bit a challenge as the levies themselves, data shows economic uncertainty is the highest it has been in years. Economists have a way of quantifying economic chaos, as multiple measures show just how uncertain the market and the economy in general are. One measure, the Economic Policy Uncertainty index from researchers at Stanford and Northwestern universities, uses an analysis of news reports, tax code data and economic forecast disagreement. According to the EPU index, uncertainty spiked in March to levels last seen during the Covid pandemic.
Yahoo
26-02-2025
- Business
- Yahoo
Morning Bid: Confidence-sapped stocks find foothold as Nvidia awaited
A look at the day ahead in U.S. and global markets from Mike Dolan Hit by draining consumer and business confidence amid uncertainty about Washington's economic policies, Wall Street stock indexes are all tripping into the red for 2025 - with the slide stalling for now, awaiting megacap Nvidia's earnings today. The latest sideswipe from main street has unnerved stock, bond and credit markets across the piece. U.S. consumer confidence deteriorated at its sharpest pace in 3-1/2 years in February, with 12-month inflation expectations surging amid worries that tariffs on imports would raise prices for households. At 8-month lows, it was the third straight monthly decrease in that measure of household sentiment and pushed the index to the bottom of the range that has prevailed since 2022. But it's just the latest in a series of similar outcomes from consumer, business and housing surveys showing rising levels of anxiety about the blizzard of sometimes conflicting new policy signals from Donald Trump's latest administration. The gnawing fear is that high levels of uncertainty are making it impossible for firms to plan and invest, dragging on economic activity and hiring, sapping stock prices and further hitting confidence in a risky spiral. Gauges of U.S. economic uncertainty are now at their highest since the pandemic lockdowns five years ago and global equivalents are at their highest on record, according to the Economic Policy Uncertainty index series. And U.S. financial markets, which had mostly assumed the Trump presidency would do the opposite for economic confidence, now appear wrongfooted and are rotating portfolios frantically. On Tuesday, the S&P 500 fell again to its lowest close of the year. The pullback in the big tech was even bigger, led by a pre-earnings 3% slide in Nvidia and a whopping 8% retreat in Elon Musk's auto giant Tesla. Tesla's market value tumbled below $1 trillion for the first time since November after news of a sales slump in Europe last month amid a series of boycott campaigns due to Musk's political roles. The European Automobile Manufacturers Association reported that Tesla sales dropped 45% in Europe, compared with a 37% jump in overall sales of EVs in Europe. That's seen the once "Magnificent Seven" of Big Tech mega caps slide deep into the red for 2025, marking an official 'correction' of more than 10% from the record peaks of December. The wider Nasdaq and small cap Russell 2000 are now down more than 2% for the year so far - a stark contrast to 14-15% gains in Germany's DAX or Hong Kong's Hang Seng. Borrowing premiums for U.S. high-yield 'junk' credits rose to their widest in six weeks. Commodity prices fell, with U.S. crude oil hitting its lowest for the year, and risky tokens like Bitcoin plunged. S&P 500 futures clawed back some of the losses early on Wednesday - awaiting Nvidia's update but also partly due to stepped-up rate cut hopes and overnight tax cut moves in Congress. Market angst ripped through the bond market on Tuesday as the household survey - which saw jobs readings fall too - stepped up Federal Reserve easing speculation. Futures now price 55 basis points of interest rate cuts for the year, more than Fed policymakers indicated themselves in December, and with an 80% chance the next one comes as soon as June. Ten-year U.S. Treasury yields plunged below 4.3% for the first time this year and two-year yields fell to their lowest since before November's election - showing another 'Trump trade' gone awry. U.S. Treasury Secretary Scott Bessent claimed the U.S. economy was "brittle underneath" and vowed to "re-privatize" growth by cutting government spending and regulation. And the Republican-controlled U.S. House of Representatives late on Tuesday advanced Trump's tax-cut and border security agenda by a slim two-vote margin, delivering a major boost to his 2025 priorities. But in another jarring take on trade policy, Trump opened yet another front on Tuesday by ordering a probe into potential new tariffs on copper imports to rebuild U.S. production of a metal critical to electric vehicles and military hardware. Overseas, Europe's stock rally this year - sown mainly by fears that Trump's moves to work with Russia to seek an end to the Ukraine war only increased the region's security risks and defense spending needs - powered on to new record highs. Germany's new government is forming after weekend elections and is seeking to increase fiscal spending, mainly on defence. Overnight, the U.S. and Ukraine have agreed on the terms of a draft minerals deal central to Kyiv's push to win Washington's support. The contents of the draft agreement said that it does not specify any U.S. security guarantees or continued flow of weapons but says that the United States wants Ukraine to be 'free, sovereign and secure.' In Asia, China's stock rally also continued and Hong Kong jumped another 3% - helped in part by its own artificial intelligence buzz surrounding the DeepSeek development. Japan bucked the trend, ending in the red on Wednesday as yen strength and a possible interest rate rise there next month rattled it. Key developments that should provide more direction to U.S. markets later on Wednesday: * U.S. January new home sales * G20 finance ministers and central bankers meet in Cape Town * Richmond Federal Reserve President Thomas Barkin and Atlanta Fed President Raphael Bostic all speak; Bank of England policymaker Swati Dhingra speaks * US corporate earnings: Nvidia, Salesforce, Paramount Global, eBay, Agilent, Universal Health, Lowe's, Synopsys, First Energy, NRG, TJX, Verisk, APA, Invitation Homes etc * US Treasury sells $44 billion of 7-year notes, $28 billion of 2-year floating rate notes (By Mike Dolan, editing by Ros Russell; Sign in to access your portfolio
Reuters
26-02-2025
- Business
- Reuters
AMERICAS Confidence-sapped stocks find foothold as Nvidia awaited
Hit by draining consumer and business confidence amid uncertainty about Washington's economic policies, Wall Street stock indexes are all tripping into the red for 2025 - with the slide stalling for now, awaiting megacap Nvidia's earnings today. The latest sideswipe from main street has unnerved stock, bond and credit markets across the piece. U.S. consumer confidence deteriorated at its sharpest pace in 3-1/2 years in February, with 12-month inflation expectations surging amid worries that tariffs on imports would raise prices for households. At 8-month lows, it was the third straight monthly decrease in that measure of household sentiment and pushed the index to the bottom of the range that has prevailed since 2022. But it's just the latest in a series of similar outcomes from consumer, business and housing surveys showing rising levels of anxiety about the blizzard of sometimes conflicting new policy signals from Donald Trump's latest administration. The gnawing fear is that high levels of uncertainty are making it impossible for firms to plan and invest, dragging on economic activity and hiring, sapping stock prices and further hitting confidence in a risky spiral. Gauges of U.S. economic uncertainty are now at their highest since the pandemic lockdowns five years ago and global equivalents are at their highest on record, according to the Economic Policy Uncertainty index series. And U.S. financial markets, which had mostly assumed the Trump presidency would do the opposite for economic confidence, now appear wrongfooted and are rotating portfolios frantically. On Tuesday, the S&P 500 (.SPX), opens new tab fell again to its lowest close of the year. The pullback in the big tech (.NDX), opens new tab was even bigger, led by a pre-earnings 3% slide in Nvidia (NVDA.O), opens new tab and a whopping 8% retreat in Elon Musk's auto giant Tesla (TSLA.O), opens new tab. Tesla's market value tumbled below $1 trillion for the first time since November after news of a sales slump in Europe last month amid a series of boycott campaigns due to Musk's political roles. The European Automobile Manufacturers Association reported that Tesla sales dropped 45% in Europe, compared with a 37% jump in overall sales of EVs in Europe. That's seen the once "Magnificent Seven" of Big Tech mega caps slide deep into the red for 2025, marking an official 'correction' of more than 10% from the record peaks of December. The wider Nasdaq (.IXIC), opens new tab and small cap Russell 2000 (.RUT), opens new tab are now down more than 2% for the year so far - a stark contrast to 14-15% gains in Germany's DAX (.GDAXI), opens new tab or Hong Kong's Hang Seng (.HSI), opens new tab. Borrowing premiums for U.S. high-yield 'junk' credits rose to their widest in six weeks. Commodity prices fell, with U.S. crude oil hitting its lowest for the year, and risky tokens like Bitcoin plunged. S&P 500 futures clawed back some of the losses early on Wednesday - awaiting Nvidia's update but also partly due to stepped-up rate cut hopes and overnight tax cut moves in Congress. Market angst ripped through the bond market on Tuesday as the household survey - which saw jobs readings fall too - stepped up Federal Reserve easing speculation. Futures now price 55 basis points of interest rate cuts for the year, more than Fed policymakers indicated themselves in December, and with an 80% chance the next one comes as soon as June. Ten-year U.S. Treasury yields plunged below 4.3% for the first time this year and two-year yields fell to their lowest since before November's election - showing another 'Trump trade' gone awry. U.S. Treasury Secretary Scott Bessent claimed the U.S. economy was "brittle underneath" and vowed to "re-privatize" growth by cutting government spending and regulation. And the Republican-controlled U.S. House of Representatives late on Tuesday advanced Trump's tax-cut and border security agenda by a slim two-vote margin, delivering a major boost to his 2025 priorities. But in another jarring take on trade policy, Trump opened yet another front on Tuesday by ordering a probe into potential new tariffs on copper imports to rebuild U.S. production of a metal critical to electric vehicles and military hardware. Overseas, Europe's stock (.STOXX), opens new tab rally this year - sown mainly by fears that Trump's moves to work with Russia to seek an end to the Ukraine war only increased the region's security risks and defense spending needs - powered on to new record highs. Germany's new government is forming after weekend elections and is seeking to increase fiscal spending, mainly on defence. Overnight, the U.S. and Ukraine have agreed on the terms of a draft minerals deal central to Kyiv's push to win Washington's support. The contents of the draft agreement said that it does not specify any U.S. security guarantees or continued flow of weapons but says that the United States wants Ukraine to be 'free, sovereign and secure.' In Asia, China's stock rally also continued and Hong Kong (.HSI), opens new tab jumped another 3% - helped in part by its own artificial intelligence buzz surrounding the DeepSeek development. Japan bucked the trend, ending in the red on Wednesday as yen strength and a possible interest rate rise there next month rattled it. Key developments that should provide more direction to U.S. markets later on Wednesday: * U.S. January new home sales * G20 finance ministers and central bankers meet in Cape Town * Richmond Federal Reserve President Thomas Barkin and Atlanta Fed President Raphael Bostic all speak; Bank of England policymaker Swati Dhingra speaks * US corporate earnings: Nvidia, Salesforce, Paramount Global, eBay, Agilent, Universal Health, Lowe's, Synopsys, First Energy, NRG, TJX, Verisk, APA, Invitation Homes etc * US Treasury sells $44 billion of 7-year notes, $28 billion of 2-year floating rate notes Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
