August 18, 2025

Hi, everyone. My name is Taylor St. Germain with ITR Economics, and welcome to this edition of TrendsTalk. We at ITR are you’re apolitical and unbiased source of economic intelligence, and today I wanted to discuss the health of broader economy.

I know there’s a lot of concerns out there in the media. There’s just a lot going on in the world of economics, which is exciting for us here at ITR, less exciting though, I know, if you’re running a business. So I wanted to just take a step back today and highlight some of the good news that we’re seeing in the underlying data that has all of us at ITR confident that we are going to continue to see a strong path forward as it relates to economic growth here in the near term.

The very first thing I wanted to point out is we track the U.S. Economic Policy Uncertainty Index. In the first half of this year, we saw economic uncertainty rise to a record high. We saw that uncertainty index rise even higher than it was during the pandemic. So we’ve just been dealing with an unprecedented level of uncertainty. The good news that I have for you though is that in the recent months we’ve seen some of that uncertainty start to subside. The way I would describe the index that we follow is economic uncertainty rose to an index value of about 530. Now just to give you all some perspective, we usually sit around a value of 100 during “normal times.” We were five times more uncertain in the first half of this year than we were from what we’re used to. But that index value has come down to 372. So we are at least seeing some of the uncertainty subside. A lot of the trade deals that have come through likely contribute to that. And we’ve also seen a number of data sets improve highlighting growth after being negative over a year. So that’s likely contributing to some of the certainty moving forward. So we’re not back down to that index value of 100, which again, I would say is more emblematic of normal times. But at least we’re not at that record high, we’re seeing some improvement there.

The second thing I’ll share with you all is that banks are lending money, which is great. If we look at bank credit on a monthly basis, the raw data is showing $18.4 trillion in bank credit, that is a record high here in the United States. If we were worried about being in a recession, if the banks were worried about the financial markets being in a recession, they wouldn’t be lending money the way they are. So I find this very encouraging. On top of that, we track a National Financial Conditions Index. Anytime this index is negative, it means our financial conditions are loosening. Anytime the index is positive, it means our financial conditions are tightening. The last two times we saw that index go positive was the pandemic and the financial crisis. So anytime we go positive, that’s when we get concerned. The good news is that that index is still negative today and trending down, meaning our financial conditions remain very loose in the United States. That comes right from the Chicago Federal Reserve, if you’re interested in looking at this data set.

And then the weekly economic index that comes from the Federal Reserve out of Dallas shows that on a weekly basis, the economy’s growing at a pretty healthy two to three percent. And that’s really been the case since the start of the year. So anytime someone says, “Taylor, are you forecasting a recession for 2025?” I usually send them that weekly economic index that shows steady growth. And I say, “how could we be forecasting a recession?”

There’s two other metrics that I’d like to highlight for all of you here today. The first is that our consumers are spending. If you look at US Total Retail Sales, which is one of our Trends Report series for those Trends Report subscribers, quarter-over-quarter, we are seeing retail sales up 4%. So not only are we seeing our consumers spending, but our spending is outpacing the rate of inflation, which means we’re not just spending more because of higher prices we’re actually buying more stuff. And that’s very important for our economy. While retail sales doesn’t represent all consumer spending, consumer spending is two thirds of the US economy. So it’s very key to understand the situation that consumers are in. And as far as we’re concerned, it’s a pretty healthy one.

And then I’ll just add that there’s some more good news out of the industrial and manufacturing world, which is that both US Industrial Production and US Manufacturing Production have transitioned from negative growth rates to positive growth rates. So despite the uncertainty in the first half of this year, we’ve continued to see our industrial economy improve and our manufacturing economy improve. And these data sets that I’m referencing are volume base. So we’re not seeing any inflation impacts, I should say we’re removing the inflation impacts from these data sets to really just see, are we seeing an increase in volume? And the answer to that is yes.

And there’s actually one more thing I’ll just highlight because it’s recent good news, which is that US Nondefense Capital Goods New Orders, another Trends Report series, has also transitioned from being negative to up 1% year-over-year. This data set is our proxy for business-to-business spending or CapEx investment. So we are finally seeing this CapEx lull come to an end. And we are seeing businesses increase their level of spending.

So if I just summarize everything I’ve shared with you so far, it highlights uncertainties coming in, banks are lending, financial conditions remain loose, our weekly economic index continues to grow, consumers are spending and spending above the rate of inflation, and we have CapEx, Manufacturing and Industrial output all transitioning to accelerating growth. I don’t know about you, but that makes me pretty confident as an economist looking at the path forward. Again, we’re not out of the woods in terms of this uncertainty. And I know tariff conversations continue to change and evolve. But I really hope everyone’s looking at this underlying data, because now is the time to prepare for growth. If you’re not preparing for growth now, you’re going to find yourself in a very difficult situation in 2026 as we see this economy soaring to record highs again.

So rest assured that we’re keeping an eye on this underlying data. Be very careful about how you’re interpreting the news out there in the media. Keep your head down, look at the data and plan for growth.

I hope you found this information helpful. Thanks so much 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. Thanks so much. Take care for now.