The U.S. economy continued to show resilience at the start of 2026, even as consumer sentiment, geopolitical issues, and a softening labor market presented a mixed backdrop.
U.S. consumer confidence fell sharply in January, dropping to its lowest level in nearly a decade. The Conference Board’s Consumer Confidence Index declined to 84.5 (a reading below 100 is viewed as pessimistic), down roughly nine points from December and marking its weakest reading since May 2014.
Households remain cautious amid persistent inflation concerns, evolving trade policy, and heightened geopolitical tensions.
Despite this softer sentiment, consumer spending, one of the primary drivers of GDP growth over the past year, has remained surprisingly durable. In addition, fiscal stimulus tied to the OBBBA (One Big Beautiful Bill Act) is expected to provide additional support to the economy in 2026. Average tax refunds could be roughly $750 higher than last year, according to estimates from the nonprofit think tank Tax Foundation, potentially offering households a temporary boost.
Signals from the industrial sector are also encouraging. U.S. manufacturing activity expanded in January at the fastest pace in more than three years, according to the Institute for Supply Management (ISM). The ISM Manufacturing PMI rose to 52.6, up from 47.9 in December and well above economists’ expectations of 48.4. The pickup reflects improved production levels and strengthening demand.
Lastly, a major market-moving development came late in the month, when President Trump announced Kevin Warsh as his nominee to succeed Jerome Powell as Chair of the Federal Reserve when Powell’s term ends in May. Warsh’s appointment is poised to shape the direction of future monetary policy, influence the perceived independence of the Fed, and play a central role in how the U.S. navigates inflation in the years ahead. The market initially viewed the appointment as more hawkish relative to other potential
candidates, but we’ll need to wait several months to see how this ultimately plays out in practice.
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