These new economic numbers and changing global geopolitics are having an effect on the health of the US economy. This piece looks at a number of important factors that support the thesis and help us understand what is affecting the US economy.
How Retailers Can Stay Strong in a Changing Economy
The steady rise in the Johnson Redbook Index shows that U.S. consumers are still spending a lot of money, which is despite rising pressures and helps keep the retail sector stable. This fits with Reuters’ figures from late 2024, which showed that spending stayed the same even though prices went down, showing that the economy is still strong.
It is important to look at things in the bigger picture. The sharp drop in 2020 marks the COVID-19 shock, while the green-shaded area in the figure shows normal retail growth trends. The current recovery shows that customer trust is still high, which is very important for keeping the economy going.
Since retail sales have stayed strong, people keeping an eye on the market will see if this strength lasts in the face of possible rate changes and changing job market conditions. If spending stays high, it could have an effect on interest rates, business profits, and investment plans in the coming months.
ISM Manufacturing Issues A Stagflation Alert
New orders have dropped to 48.6 on the ISM Manufacturing report for February 2025, while prices paid have gone up to 62.4. This is a worrying difference. This is a sign of stagflation, which happens when prices go up but people don’t want to buy things. Conditions like these make it hard for companies, especially those that make things, because they cut into profits and slow growth.
The report from Reuters about possible taxes under President Trump’s policies makes things even less clear. Higher trade hurdles could make input costs go up, supply chain problems get worse, and manufacturing problems get worse.
In the past, stagflation was caused by supply shocks, like the oil crisis in the 1970s, when prices went up faster than the economy could produce. The Federal Reserve may have to change its monetary policy if this trend continues. In an uncertain market, companies may also have to rethink their price and investment plans.
Problems in the housing market Due to High Rates
According to Redfin, 14.3% of home purchases were cancelled in January 2025. This was the highest rate since 2017 and shows that financial problems are very serious. Mortgage rates are still high at 6.72 percent, which makes sellers hesitant and slows down deals even though rates have recently gone down.
The fall coincides with fewer potential house sales and a limited quantity of homes, which makes the economy even less certain. Talks on X point to a low in mortgage rates in 2025, but consumers are still cautious, which is holding back a full rebound.
Even though more people are refinancing, the housing market’s recovery is still unstable until prices fall again and people trust each other again. This could hurt real estate-related industries and the economy as a whole.
Trade Changes and the Safety of North America
The data from Bloomberg Economics shows an important fact about trade: China is less dependent on U.S. goods than Mexico and Canada are. This makes them more subject to taxes. North America’s economies are under more stress because President Trump is putting 25% duties on goods from Canada and Mexico and only 10% on goods from China.
In addition to trade issues, these taxes are political and have to do with immigration and drug policy, especially the trafficking of fentanyl. The effects on the economy could be very bad, messing up supply lines and making things more expensive for U.S. companies that depend on trade with North America.
At the same time, problems between the U.S. and China keep sending industry to places like Vietnam, which speeds up the diversity of the supply chain. Businesses have to deal with changing cost structures, regional risks, and changing economic policies that are affecting the next part of international trade.
Auto sales in the U.S. are being hurt by high prices
According to data from Bloomberg Finance L.P., U.S. car sales fell in February 2025, even though they went up a little month-over-month. This shows that the market is stabilising even though the economy is still struggling. Wards data shows that high interest rates and problems with pricing are limiting demand.
The industry is clearly having a hard time because annualised sales fell short of the 16.14 million expected, showing that problems are still there. McKinsey’s research shows that changing customer habits and economic insecurity will cause problems in the long run.
Automakers are at a crucial point as worries about pricing grow and borrowing costs rise. In a market that is becoming more limited, the industry will have to change its path by using different price tactics, rewards, and changing customer tastes.
To conclude, indices trading would be the area where investors would take most of the advantage of the heightened volatility in the market. The US stock indices are very much near the their flat line. This means if the economic recovery picks up more pace, there would be plenty of room for the upside.