US business growth slows as consumer inflation expectations rise sharply

03 Mar, 2025

U.S. business activity nearly stalled in February due to mounting fears over tariffs on imports and deep federal spending cuts. The slowdown erased post-election gains, with the S&P Global Composite PMI dropping to a 17-month low of 50.4 from 52.7 in January. The services sector contracted for the first time since January 2023, while manufacturing activity saw an eight-month high, driven by firms stockpiling in anticipation of tariff-related cost increases.  

The S&P Global survey, conducted from February 10-20, highlighted growing concerns among businesses and consumers about the Trump administration’s economic policies. While optimism soared after the Republican’s election win, expectations of a less stringent regulatory environment, tax cuts, and controlled inflation have been overshadowed by rising policy uncertainties.  

President Trump imposed a 10% tariff on Chinese imports in his first month in office, while a 25% levy on Mexican and Canadian imports remains suspended until March. Steel and aluminum tariffs have been raised to 25%, and additional duties on auto, semiconductor, and pharmaceutical imports are expected. These policies have fueled widespread concerns over supply chain disruptions and rising costs.  

Federal spending cuts have also contributed to economic uncertainty, with thousands of government employees, from scientists to park rangers, dismissed under the newly created Department of Government Efficiency (DOGE), led by Elon Musk. The cuts are causing businesses to reassess investments and hiring plans.  

Chris Williamson, chief economist at S&P Global Market Intelligence, noted that companies report declining sales due to policy uncertainty, while suppliers raise prices in response to tariff-related cost pressures. The latest data signals a challenging economic landscape as businesses and consumers navigate a shifting political and financial environment, raising fears of a broader economic downturn.

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