Is the US economy getting better or worse? That depends on who you ask

It’s been two months since President Trump returned to his seat in the Oval Office and a lot has happened since including further uncertainty about the US economy.

With some expressing concern that tariffs – including those that will affect trading relations with America’s closest neighbors – could derail plans for generous tax cuts for the average Joe and may also see inflation spiking again, consumers appear worried about the direction of travel for the economy.

New stats from Gallup show that consumers believe the economy is getting worse. In February, the reading of its Economic Confidence Index was -19, the same as in January having gained for two consecutive months since the election in November. However, it had been as low as -35 last summer and was -26 in October.

The data this month suggests consumers see the current state of the economy as ‘fair’ with 45% expressing this compared to 20% who see it as ‘good’ (down from 25% in January), and 33% saying it’s ‘poor’ (down from 40% in January).

Perhaps more concerning is that only 35% of respondents say the economy is improving with 59% saying it’s getting worse.  While this is down from 70% last summer, it’s been rising since hitting a trough of 52% in December.

Gallup’s research chimes with that of the University of Michigan. Its Surveys of Consumers reveals that, this month, consumer sentiment was down almost 10% from January (and 16% year-over-year) with buying conditions for durables weighing heavily, likely due to the threat of tariff-induced price hikes.

UoM’s report also shows declines of around 10% for consumer sentiment on personal finances and the economy in the near term. Expectation for inflation increases rose by the largest amount (3.5%) since May 2021.

BUSINESS CONFIDENCE

But while consumers may be fearful, business leaders appear to have more confidence that things are headed in the right direction.

The Conference Board’s Measure of CEO Confidence is up 9 points for the first quarter of 2025, with a reading of 60 marking its highest level in three years. A score of 50 or above means more positive than negative responses.

More than four in ten (44%) CEOs said economic conditions were better than six months ago, up from just 20% last quarter, while 11% said economic conditions were worse, down significantly from 30% in Q4 2024. And 56% of CEOs expected economic conditions to improve over the next six months, up from 33% in Q4, with just 15% expecting conditions to worsen, down from 23%.

Increased sentiment among business leaders may go some way to reassuring consumers, especially with 73% of CEOs intending to grow (32%) or at least maintain (41%) their workforce over the next 12 months. And 71% of respondents plan to give their employees a raise of at least 3% over the year.

"The improvement in CEO Confidence in the first quarter of 2025 was significant and broad-based," said Stephanie Guichard, senior economist, Global Indicators, The Conference Board. "All components of the Measure improved, as CEOs were substantially more optimistic about current economic conditions as well as about future economic conditions—both overall and in their own industries. Consistent with an improved expected outlook, there was a notable increase in the share of CEOs expecting to increase investment plans and a decline in the share expecting to downsize investment plans. Still, a majority of CEOs indicated no revisions to their capital spending plans over the next 12 months."

Meanwhile, recent opinion from Wall Street economists suggests little risk of recession this year and advisors tend to agree.