Yet inflation flares up again in a potentially worrisome sign
The first look at Donald Trump's economy shows the U.S. continues to grow at a brisk pace, and business leaders expect even better times in the year ahead.
The one big caveat: Inflation pressures might be rising again.
A survey of top executives who buy supplies for service-oriented companies slipped to 52.8 in January from a 38-month high of 56.8 at the end of 2024, S&P Global said Friday.
"Uncertainty in the lead up to the presidential election has been replaced with optimism about the future." Chris WilliamsonS&P Global chief business economist
The S&P service index had surged in December in the wake of Trump's election as companies looked forward to what they expect will be a business-friendly White House.
Some of the euphoria faded in January, but any number above 50 signals growth.
Services companies such as banks, retailers and health-care providers employ most Americans and are a huge part of the economy.
A similar survey of manufacturers, meanwhile, rose to a seven-month high of 50.1 and topped 50 for the first time in seven months. Manufacturers have been in a two-year slump.
Executives said they were mostly optimistic about the future, especially in the manufacturing sector. They expect orders to hit the highest level in three years, S&P said, and companies stepped up efforts to hire more workers.
Trump did not officially take office until Jan. 20, but Republicans have been in control of Congress since the beginning of the month and companies have already been planning for the policies of new administration.
The economy has been on a roll for the past two years, growing at a nearly 3% pace.
Yet high interest rates and the costly toll of several years of rapid inflation have left many Americans frustrated, paving the way for Trump to win a second term in office.
The S&P surveys are the first indicators of each month to give a sense of how the U.S. economy is performing.
Key details: Not everything was hunky-dory in the latest survey of business leaders.
Some worry about the prospect of Trump tariffs depressing sales, leading to more inflation or making supplies harder to procure.
The Federal Reserve might also not lower interest rates much if inflation remains elevated, an outcome that would be most damaging to manufacturers. High rates, for instance, have depressed car sales.
Still, the general tone was one of optimism.
A gauge of employment rose at the fastest rate in two and a half years, for one thing, and manufacturers reported the first increase in orders in seven months.
"Uncertainty in the lead up to the presidential election has been replaced with optimism about the future," said S&P Global chief business economist Chris Williamson.
Big picture: The economy has expanded at a robust pace for the past few years, led by strong consumer spending.
The prognosis for 2025 is more of the same: above-average growth in the range of 2.5% to 3%.
Looking ahead: "U.S. businesses are starting 2025 in an upbeat mood on hopes that the new administration will help drive stronger economicgrowth," Williamson said. "However, rising price pressures are a concern."
Market reaction: The Dow Jones Industrial Average fell, but the S&P 500 SPX rose, in Friday trading.
-Jeffry Bartash
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