Trump’s Producer Economy Can Bring Down Inflation
The economic story of 2025 is becoming increasingly difficult to ignore. America’s production engine is roaring back to life.
February’s economic data provided a striking contrast to the narrative of stagnation and uncertainty that has dominated discussions of the U.S. economy in recent weeks. While consumer spending and business sentiment have shown signs of caution, the industrial and housing sectors tell a different story—one of expansion, renewed confidence, and a steady ramp-up of supply-side economic activity.
Industrial production surged 0.7 percent in February, blowing past expectations for a 0.2 percent gain. The increase pushed total industrial output to an all-time high, surpassing its previous peak from Trump’s first term. Manufacturing output rose 0.9 percent, the strongest gain in a year, with a particularly dramatic 8.5 percent surge in auto production. That recovery is no fluke. Motor vehicle and parts output had been declining by an average of 0.5 percent per month in Biden’s final year in office. Now, it’s roaring back.
Housing construction is also shifting into high gear. Housing starts jumped 11.2 percent in February, rising to an annualized pace of 1.5 million, the highest level in nearly two years and far exceeding economists’ expectations of 1.38 million. Single-family home construction surged 11.4 percent to an annualized 1.11 million—the fastest pace since early 2023. After two years of stagnation, builders are clearly confident enough to ramp up supply.
That confidence extends beyond housing and manufacturing. Mining output, including oil and natural gas extraction, climbed 2.8 percent, reflecting renewed investment in U.S. energy production. The U.S. is now the largest net exporter of natural gas in the world, a position strengthened by Trump’s reopening of 625 million acres for offshore drilling, the reversal of Biden’s LNG export ban, and the administration’s broader push to unleash American energy.
A Structural Shift: From Demand Stimulus to Supply Side Growth
These are not just random data points. They reflect a structural shift in the economy—from stimulus-driven demand to supply-driven expansion. The early results are already showing up in inflation data.
Consumer prices cooled in February, with CPI falling to 2.8 percent year-over-year, down from 3.0 percent in January. Core CPI, which strips out food and energy and is often viewed as the best measure of underlying inflation, declined to its lowest level since April 2021. Producer prices, as measured by the PPI, remained flat, while economists had expected a 0.3 percent increase. The trend is clear: production is expanding, and inflationary pressures are easing as supply catches up with demand.
The impact on prices is already being felt across key goods and services. Gas prices have declined nationally for four straight weeks, with 34 states now seeing averages below $3 per gallon. The price of crude oil has dropped more than 11 percent since Trump took office and is now down over 40 percent from its peak under Biden. One of the starkest examples of this supply-side disinflation is in food prices: egg prices, which hit a record $6.55 per dozen in January, have now fallen nearly 50 percent to $3.45 per dozen, thanks in part to USDA efforts to stabilize the market.
Despite these shifts, much of the media coverage continues to frame this economic acceleration as temporary or artificial. The legacy media reports on Tuesday suggested that the surge in manufacturing and construction is just a weather-driven rebound, arguing that an unusually cold January delayed projects that simply resumed in February. But that explanation fails to account for the scale of the expansion. Industrial production is not just recovering—it has now exceeded its previous peak. Single-family home construction has accelerated to its fastest pace in a year. Mining and energy production are growing despite higher interest rates and regulatory constraints that remained in place under Biden.
In any case, the Cold January narrative doesn’t explain why the February results exceeded expectations. After all, Wall Street’s economists knew January was a harsh month and this was incorporated in their forecasts. The results beat what weather alone would have suggested.
The shift in economic conditions is a direct result of policy changes. The previous administration relied on demand-side intervention—subsidies, tax credits, and government spending—while leaving supply-side bottlenecks untouched. That approach produced rising prices, supply shortages, and an inflationary spiral that proved difficult to contain. The Trump administration has taken the opposite course, focusing on removing constraints on domestic production, expanding energy output, and creating an environment where builders and manufacturers are willing to ramp up capacity.
Reprivatizing The U.S. Economy
This shift toward production is not happening in isolation—it is part of a broader effort to reprivatize the American economy by reducing reliance on government spending and empowering private sector investment. Treasury Secretary Scott Bessent has been clear about the administration’s goal: to transition away from an economy propped up by public-sector job growth and stimulus-driven demand, and toward one driven by business investment, industrial expansion, and productivity gains. Bessent has described the economy under the prior administration as “brittle underneath,” with nearly all job growth concentrated in government and government-adjacent sectors such as healthcare and education. In contrast, the current trajectory is one where private capital, not federal intervention, fuels growth—a model that strengthens the real economy rather than inflating it artificially.
The data bear this out. The surge in industrial production, manufacturing output, and mining activity reflects a return to real, supply-side economic growth, rather than temporary boosts from government-driven demand. Bessent has acknowledged that this shift will require an adjustment period as the economy detoxes from years of public-sector overexpansion. But the ultimate goal is clear: a revitalized Producer Economy, where businesses, not bureaucrats, allocate resources and drive innovation. The early signs—rising factory output, a booming energy sector, and a sharp rebound in home construction—suggest that this transformation is already underway.
The National Energy Emergency declaration has been one of the most significant policy moves, unlocking domestic energy production and cutting costs for American families. The Department of Energy’s deregulatory efforts have reversed burdensome Biden-era mandates that were set to increase the cost of air conditioners, water heaters, gas stoves, and even light bulbs. In total, deregulation efforts since Trump took office have already saved American consumers an estimated $180 billion, or $2,100 per family of four.
This is not just a shift in policy—it is a shift in the structure of the U.S. economy itself. The return to production marks a fundamental departure from the stimulus-fueled, consumption-driven model that defined the past decade. This shift also explains the stock market’s recent volatility, as investors recalibrate their portfolios out of the investment strategies built around Biden’s unsustainable deficit policies toward the Trump economy.
Jared Woodard of Bank of America recently captured the shift in a note to the bank’s clients:
It may take time for private sector job growth to accelerate, for government workers to resettle, for broad-based corporate profits to rise, and for global trade to find a new equilibrium. In our view, the likely productivity gains from a market-based economic reboot are greater than risks; and the risks from the unsustainable status quo of debtfinanced, tepid, and narrow economic growth are severe.
The story told by February’s data is clear: when production expands, prices fall. Supply-driven disinflation is finally bringing relief to consumers after years of elevated costs. The media may continue to search for ways to downplay this shift, but the numbers tell a different story. The U.S. economy is no longer running on government stimulus and consumption-driven policies. It is being powered by a return to production, and that is the defining economic shift of 2025.
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