In January 2025, the U.S. economy displayed a blend of resilience and new challenges appearing in different sectors.
Trends in Business Activity and Employment
The S&P Global Flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 52.4 in January from 55.4 in December, reaching its lowest point since April. Even with this reduction, the index stayed above the 50 mark, suggesting ongoing expansion. The deceleration was mainly due to the services sector, whereas manufacturing saw growth for the first time in seven months, spurred by anticipated loosened regulations and reduced taxes under the current administration. Remarkably, businesses ramped up hiring at the fastest pace in two and a half years, reflecting optimism about future economic conditions.
Confianza y Gasto del Consumidor
In January, consumer confidence decreased for the second month in a row. The Conference Board announced a drop in its consumer confidence index to 104.1, down from 109.5 in December, which did not meet economists’ predictions. This decline illustrates increasing worries among Americans about present economic circumstances and future outlooks. Despite increased borrowing expenses, retail sales climbed by 0.4% in December, showing strong consumer spending over the holiday period. However, perceptions of current job market conditions became less optimistic, and short-term forecasts for income, business, and employment diminished, nearing levels that might indicate a possible recession.
Consumer confidence dipped for the second consecutive month in January. The Conference Board reported a decline in its consumer confidence index to 104.1 from 109.5 in December, falling short of economists’ expectations. This decrease reflects growing concerns among Americans regarding current economic conditions and future prospects. Despite higher borrowing costs, retail sales rose by 0.4% in December, indicating robust consumer spending during the holiday season. However, views on current labor market conditions weakened, and short-term expectations for income, business, and employment declined, approaching levels that could signal a potential recession.
Consumer inflation expectations have increased significantly. According to the University of Michigan’s consumer sentiment survey, expected inflation for the upcoming year rose to 3.3% in January, up from 2.8% in December, reaching its highest point since May. Long-term inflation expectations also rose to 3.3%, the most elevated since June 2008. These elevated expectations might affect actual inflation, as businesses may feel more confident in increasing prices. In reaction to these changes, the Federal Reserve is likely to keep the federal funds rate within the 4.25% to 4.50% target range at its forthcoming meeting, taking a measured stance on monetary policy amid ongoing inflation worries.
Dynamics of the Labor Market
El mercado laboral sigue siendo fuerte, con las solicitudes iniciales de beneficios por desempleo aumentando ligeramente en 6,000, alcanzando 223,000 en la semana que finalizó el 18 de enero de 2025. Este incremento marginal sugiere que los despidos siguen siendo bajos, incluso cuando las oportunidades laborales se vuelven más escasas debido a la cautela de los empleadores al expandir sus plantillas. La fortaleza del mercado laboral respalda la decisión de la Reserva Federal de pausar nuevos recortes en las tasas de interés mientras evalúa la duración necesaria de una política monetaria restrictiva para alcanzar una tasa de interés neutral.
Mercados Financieros y Sentimiento del Inversor
Financial Markets and Investor Sentiment
Financial markets have exhibited volatility in response to mixed economic data and corporate earnings reports. Major indexes closed lower, with the technology sector leading the downturn. Strong housing market data contrasted with a slowdown in business activity, while consumer sentiment declined. Investors are closely monitoring these indicators ahead of key economic releases and the Federal Reserve’s policy decisions. The prospect of potential inflation stemming from proposed tariffs has also contributed to market uncertainty.
