US Economy: Growth Is Robust, but Sentiment Could Be Better

The US is currently in the spotlight as the host country of the World Cup, but domestic sentiment is mixed. Consumer sentiment in the U.S. fell to a new low this spring amid rising energy prices and fears of inflation. However, the prospect of a resolution to the Middle East conflict could now bring about a turnaround; recent sentiment data has already shown signs of recovery.

While the ball keeps rolling in these three countries leading up to the final on July 19, we take a look at the latest sentiment and economic data from the World Cup host countries.

Inflation Well Above Target

As recently as May, the University of Michigan’s consumer sentiment index had fallen to a record low of 44.8 points. According to survey director Joanne Hsu, the main reason for the plunge was the sharp rise in gasoline prices caused by supply bottlenecks in the vital Strait of Hormuz shipping route.

The rise in oil and energy prices in the wake of the Iran war and the Hormuz blockade was also clearly reflected in inflation data this spring. In May, the inflation rate stood at 4.2 percent, the highest level since April 2023. Energy prices in May were 23.5 percent higher than in the previous year, and gasoline prices were up as much as 40 percent. Inflation thus remains well above the Federal Reserve’s target and has also fueled fears in financial markets of countermeasures in the form of Fed interest rate hikes.

Data as of 16 June 2026

Prospects for an end to the Middle East conflict bring a sigh of relief

However, the latest signs of an impending resolution to the Middle East conflict have already brought about a measurable improvement in sentiment. After weeks of negotiations, the U.S. and Iran reached an agreement last weekend. As part of the deal, the Strait of Hormuz is also set to reopen by the end of the week, according to U.S. President Trump. Many observers viewed the deal as an intermediate step in a diplomatic process that still faces many hurdles. Chief Economist Gerhard Winzer has already analyzed the implications and possible next steps here on the blog.

The emerging agreement had already led to a decline in oil prices and, consequently, a recovery in consumer sentiment. In June, the University of Michigan’s consumer sentiment index improved by a surprisingly significant 4.1 points to 48.9 points due to falling gasoline prices. Consumer inflation expectations also eased slightly from high levels. Over a one-year horizon, they fell from 4.8 to 4.6 percent.

US job market remained robust despite the war

Other economic indicators recently painted a largely solid picture despite the war with Iran. For example, twice as many jobs were created in the US in May as expected, despite the uncertainty caused by the war. In total, 172,000 non-farm jobs were created; economists surveyed by the international news agency Reuters had expected an increase of only 85,000. The unemployment rate remained at 4.3 percent for the third consecutive month. According to economists, while the war in Iran has unsettled many companies, this has likely not yet had a major impact on the job market.

In its latest forecast update in April, the International Monetary Fund (IMF) made only minor adjustments to its estimates for the U.S. Due to the war in Iran, IMF economists lowered their economic growth forecast for the US this year from 2.4 to 2.3 percent. Industrial production has also remained stable recently. Although production in May rose by only 0.1 percent compared to the previous month – slightly less than expected – the April figure was revised upward from 0.7 to 0.9 percent.

The US trade balance recently showed a slight improvement. The U.S. trade deficit narrowed slightly in April due to record-high exports. Imports exceeded exports by only 55.9 billion dollars. In March, the deficit had stood at 56.6 billion dollars. The reason for this development: Exports grew by 2.6 percent from the previous month to a record 327 billion dollars, while imports rose by only 2.0 percent to 383 billion dollars. The record number could also be attributed to the increase in oil shipments.

Canada and Mexico are betting on new partnerships amid an economic slump

The other two World Cup host countries, Canada and Mexico, are currently experiencing slow economic growth. The tariffs imposed by Trump on imported goods already hit the Canadian manufacturing sector hard last year. This forced many companies to cut production, lay off workers, and reduce investments. In the first quarter of 2026, Canada’s gross domestic product (GDP) contracted by 0.1 percent. According to IMF forecasts, the country is expected to achieve 1.5 percent growth for the full year. For Mexico, the IMF expects 1.6 percent growth this year.

Both countries are currently seeking new trade partnerships and alliances to reduce their dependence on the U.S. Most recently, after years of negotiations, the EU and Mexico signed a modernised version of their trade and cooperation agreement from 2000. This is intended to eliminate further tariffs and trade barriers as well as update the framework for cooperation.

Canada plans to work with other countries to reduce its dependence on China for raw materials

For the most populous Spanish-speaking country, with 130 million inhabitants, the EU is the second largest export market after the US on a global scale. The annual bilateral trade volume with the EU amounts to around 86 billion euros. About 80 percent of Mexican exports go to the US, whose economy has become increasingly insular under the administration of US President Donald Trump due to the introduction of new tariffs.

Canada is currently working with Japan and France to explore alternatives to a U.S.-led trade bloc for critical raw materials. The goal is to reduce reliance on China and secure supply chains, government officials said. Options under discussion include import quotas for rare earths, subsidies for mining companies, and a buyers’ club initiated by Canada. In doing so, the countries appear to be distancing themselves from plans by U.S. Vice President JD Vance, who had proposed a U.S.-dominated trade bloc. In light of President Donald Trump’s policies, Canadian Prime Minister Mark Carney called for middle-power countries to unite.

 

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