April 28, 2025

Hi everyone, my name is Taylor St. Germain with ITR Economics and welcome to this edition of TrendsTalk. We at ITR are an apolitical and unbiased source of economic intelligence and today I want to discuss the uncertainty that we’re facing, but what we see in the underlying data that has ITR optimistic on our future and likely more optimistic than what you’ve been reading in the media as of late at least.

And so I wanted to first acknowledge that these are uncertain times. We look at a data set called the US Trade Policy Uncertainty Index and it is at a record high right now and it is far higher than it was even at the worst of the pandemic. So just to give you a little perspective on the uncertainty, I’m sure many of you out there are feeling it and the data is clearly showing it. And so while we could spend our time talking about tariffs, we’ve done that on previous podcasts, and we have several blogs out now discussing tariffs, I wanted to focus on some of the positives that we’re seeing in the face of all of this uncertainty.

Now ITR’s GDP forecast is one that is likely again more robust than at least the picture the media has been painting lately. We do anticipate that we see general rise in real GDP with the second half coming in stronger than the first half, there’s no doubt about that. But we are not in the recession camp as it relates to US GDP. Again, like many folks out there in the media are. And the reasoning for that is some of the underlying factors, especially trends with consumers and even the industrial economy as of late, are continuing to show signs of strength, resiliency and some positive signals. And so I wanted to unpack a few of those here briefly.

Now we forecast US Total Retail Sales, it’s one of the important consumer perspectives to have. And we forecast this in our trends report, so you can see more on this forecast. But we continue to expect Retail Sales to grow. We expect that the dollar value of Retail Sales continues to reach new record highs when you look at that 12 month moving total, really all the way through the end of 2026. If you look at where Retail Sales is today, we are still seeing year over year growth at 2.9%, in quarter over quarter growth that 3/12 at 2.8%. Our forecast for Retail Sales for the end of 2025 is a 4.6% growth rate, and for 2026 is a 4.5% growth rate.

Why do I spend time talking about Retail Sales? Because it shows that consumers are still spending. Now, consumer spending, personal consumption, is two-thirds of US GDP. So Retail Sales gives us at least a little bit of insight into that consumer space, and we continue to expect record high dollar value and consistent growth as we move forward. So that’s important, is that consumers are still spending, and we’re seeing that today.

The other thing I’d highlight is that consumers are still seeing rise in their real personal income. So despite tariffs, despite the uncertainty, despite geopolitics, we’re spending more money, as shown by Retail Sales, we’re making more money as displayed by real personal income, and we also are handling our debt. When I look at Household Debt per Capita as a percentage of median annual earnings, that number is currently at 107.6%. And while that sounds high, that’s below the 10-year average, and during 2008-2009, that number actually exceeded 143%. It’s similar with Credit Card Debt as a percent of earnings. We’re at 14.7% here today, which is still below the pre-pandemic levels and nowhere near the 20-plus percent that we saw during 2008-2009.

So the reason I share these statistics with you is the consumer part of the economy, which again is two-thirds of the U.S. Economy, we are seeing consumers still spend, we are seeing consumers make more money, and we are seeing consumers handle their debt. Now I’m giving you a macroeconomic picture, of course, when you dive into different income brackets, there’s some nuances, but I’m trying to give you the holistic picture here, which is the consumers are still showing strength, resiliency and are in good shape as we sit here today, despite all of the challenges.

If I flip over to the B2B side of the economy or look at US Industrial Production, which is one of our flagship series that we’re discussing often here, we’ve seen more positivity from that series as well. Again, I’ll remind you in 2024 Industrial Production spent most of the year below zero in contraction. But as we sit here today, the 3/12 growth rate for Industrial Production has continued to accelerate with the data through March, that 3/12 growth rate is up 1.8%. And even the year over year growth rate has turned positive and moved into that accelerating growth phase of the cycle up 0.3%.

So, when I look at two important aspects of this economy, the consumers and the industrial space, we’ve continued to see nothing but positive sentiment continue throughout the first quarter of 2025, despite, again, all of the uncertainty, the geopolitics, the tariffs. And I hope you find that encouraging to see that, yeah, in the face of all these challenges, the data continues to improve, like we would suggest.

Be careful about reading too much into the media, be careful about correlating what’s going on in the stock market to the greater GDP economy, because we’ve known, and we’ve talked about this in the past, that that relationship is not one that’s very reliable between the stock market and GDP. Focus on the individual markets, focus on this macroeconomic data and what the data is telling us. And the data tells us we should be moving forward with this level of optimism, and we should be planning our businesses for growth in 2025.

Now if anything changes, I’ll be the first to share that with you all, but our leading indicators continue to suggest better times ahead. And a lot of this information is in our ITR Trends Report, if it’s something you want to follow on a more regular basis. So I hope that you’ll weed through the noise, and you’ll really look at the data-driven insights that we can provide you with. And I think you’ll find yourself in a level of a bit more certainty, at least, as we look at the path moving forward. Like I said, we’ll continue to keep you updated as this situation evolves. But my biggest fear is that we aren’t going to be ready for all this growth that’s coming our way as we get later into this year, and certainly into 2026.

I hope you found this information helpful. Thanks for joining me on this episode of TrendsTalk. Please like and subscribe to TrendsTalk wherever you listen to your podcasts, and I look forward to seeing you all in the next one. Thank you so much, and take care for now.