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Trump Slump: "U.S. Business Activity Stalling; Consumers' Inflation Expectations Surge" (Reuters) [1]
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Date: 2025-02-21
The data on the Trump Slump are starting to come in. First, Retail sales fell in January. Here’s a nonpaywalled (I think) link to a Reuters article from last week: US retail sales post biggest drop in nearly two years amid winter freeze. Of course, one month isn’t a trend, and, as the headline implies, cold weather could indeed have been a factor. Nevertheless, that’s an important datapoint. Second, today we learned that home sales fell by nearly 5% in January. Here’s a Reuters link: US existing home sales fall more than expected in January. Again, could be a fluke, we don’t know for sure yet.
However, later this afternoon, some more comprehensive, but still preliminary, data showed a more broad-based post-Trump slowdown. Here’s a block quote below, and here’s the link: US business activity stalling, consumers' inflation expectations surge.
WASHINGTON, Feb 21 (Reuters) - U.S. business activity nearly stalled in February amid mounting fears over tariffs on imports and deep cuts in federal government spending, erasing all the gains notched in the aftermath of President Donald Trump's election victory. The tumble in activity to a 17-month low reported by S&P Global on Friday was the latest in a string of surveys to suggest that businesses and consumers were becoming increasingly rattled by the Trump administration's policies. Business activity index falls to 17-month low in February
Manufacturing prices paid measure highest since late 2022
Consumers' one-year inflation expectations at 15-month high
Long-term inflation expectations highest since 1995
I live in the Washington DC, Maryland, VA area. Our family owns two retail stores in the area. We’ve seen about a 35% reduction in sales since the election in early November 2024. January was particularly bad, although the weather was indeed colder and snowier than we’ve come to expect. But the sales slump started with the election itself. In my opinion, it’s not the weather (November and December 2024 were nice!) — it’s the uncertainty about layoffs, tariffs, and inflation that is hurting sales.
Unemployment claims have already doubled DC-Md-Va metro region in the most recent week, but that’s just the tip of the iceberg. In the coming weeks that number will spike more noticeably, and will probably start to impact the national figures.
But today’s reports also point to a broader, more national phenomenon, a national hesitation. Who wants to make investments when we don’t know if tariffs will be imposed and whether paused government contracts will be honored at all? I think the U.S. economy — not just the DC region — is at risk of freezing up, at least temporarily, due to the uncertainty of Trump’s policies.
I also think the “crazy billionaire effect” is beginning to unsettle consumers. Thoughtful people are starting to realize that Musk’s takeover of government IT systems isn’t really about efficiency or budget cutting — the DOGE boys are taking over administration of our nation’s computers systems to enact revenge on their enemies — or at least to credibly threaten to — and to pro-actively stifle dissent. It’s not about efficiency or deregulation or cutting bureaucracy, folks. If it were, they wouldn’t need our personal data.
The next big round of economic data will come in next Friday Feb 28th. We’ll see if the more comprehensive data supports these initial Trump Slump indicators.
How are economic conditions in your line of business, and in your region?
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