Growth is still solid and jobs are steady, but prices are picking up again and interest rates are moving higher.
The economy is still growing, but not speeding up: Real GDP (the total value of everything the US economy produces) was 2.2% compared to last quarter, unemployment is 4.2%, and the Fed's short-term rate is 3.875%. The main takeaway is that prices are heating up again, and that was the biggest move this week, which makes rate cuts less likely and keeps loans, mortgages, and credit cards expensive. What is keeping things steady is the job market, with few new layoffs and unemployment still fairly low, even as higher rates keep pressure on spending. The next big thing to watch is the PCE report (Personal Consumption Expenditures, the inflation measure the Fed watches most), because it could change the outlook for interest rates. Not investment advice.
The biggest moves in the numbers we watch since our last update.
September CPI (Consumer Price Index, the main measure of how much prices are going up) was 3.74%, cooler than the 4.17% forecast, but up from 3.35% in August. Fighting near key oil routes could lift gas and heating costs for households. Watch next month's CPI report: if core prices keep rising above 3% compared to the same time last year, inflation is heating up again.
September CPI (Consumer Price Index, the main measure of how much prices are going up) was 3.74%, cooler than the 4.17% forecast, but up from 3.35% in August. Fighting near key oil routes could lift gas and heating costs for households. Watch next month's CPI report: if core prices keep rising above 3% compared to the same time last year, inflation is heating up again.
The Federal Reserve, the US central bank, still looks set on keeping policy tight, with its policy rate midpoint at 3.875%. News pointing to a higher-rate world through 2027 means credit cards, car loans, and mortgages may stay expensive longer. Watch the next Fed meeting: any sign rates stay high longer would keep borrowing costs under pressure.
The job market still looks balanced, with initial claims (the number of people who filed for unemployment benefits for the first time that week) at 198,500 after 198,250 the week before. That low level suggests layoffs are still limited. Watch the next unemployment report: if claims rise for several weeks or unemployment moves well above 4.2%, the job market would be weakening.
Risk conditions are uneasy, even though the gap between 2-year and 10-year Treasury rates is a still-positive 37 basis points (one hundredth of a percentage point). Fighting tied to global oil supply could raise gas prices and make markets more jumpy. Watch oil prices and Treasury moves next: a sharp jump would signal investors are getting more worried.
Growth still looks steady, with Real GDP (GDP after adjusting for inflation) running at 2.20% compared to last quarter. Fighting near major oil supply routes could raise fuel costs, which can leave families and businesses with less to spend. Watch the next GDP update: a clear slowdown would mean the economy is losing momentum.
Geopolitical risk spiked as Middle East conflict disrupted energy flows after a Houthi attack on Riyadh airport, lifting oil and inflation fears. Political pressure on Fed independence and IMF war/debt warnings added to market stress.
Jobless Claims: 198,500.00 (no pre-release consensus available).
CPI below estimate: actual 3.74 vs 4.17.
Jobless Claims: 198,250.00 (no pre-release consensus available).
The week's events, lined up with how they likely affected the economy.
US CPI (Consumer Price Index, the main measure of how much prices are going up) rose to 3.7%, which could keep borrowing costs high and pressure stocks and bonds.
Fighting tied to Iran and an attack near a major Saudi hub could cut oil supply, which may raise gas prices and make markets more nervous right away.
If interest rates stay high through 2027, borrowing may stay expensive and investment prices may face pressure for a long time.
The September CPI report (Consumer Price Index, the main measure of how much prices are going up) could move markets because it shapes where interest rates may go next.
Core inflation came in higher than expected, which makes more Fed rate hikes more likely and can pressure stocks, bonds, and borrowing costs.
The 11 main US stock market industries, plotted by whether the economy is helping or hurting them, and how the industry itself is doing. Click any industry for details.
Each force, where it stands today, which way it's headed, and the data behind it.
Realized GDP: 2.20% QoQ SAAR
Real GDP growth is 2.20% QoQ SAAR and 2.19% YoY.
Core CPI: 2.56% YoY; 3m trend: 2.89%
Core inflation is 2.56% YoY with a 3m annualized trend of 2.89% (momentum gap 0.32 ppts).
Unemployment: 4.2%; claims 4wma: 198,500
Unemployment rate is 4.2% (YoY change -0.10 ppts); initial claims 4wma 198,500.
Policy mid: 3.875%; gap: 0.945 ppts
Policy midpoint is 3.875% with a 30-day change of +0.250 ppts; market rate gap (2Y minus policy) is 0.945 ppts.
2s10s: 37.0 bps
The 2s10s yield spread is 37.0 bps and the curve is normal.
Things that could change our view of the economy before next week's update.
The next turn likely depends on inflation, because price pressure just picked up while growth and jobs still look steady. The closest swing points are the Fed Policy Decision and GDP, since one could lock in higher borrowing costs and the other could show whether the economy is still holding up.
If the Fed Policy Decision points to rates staying high or going higher, loans, mortgages, and credit cards could stay expensive longer. That matters more now because inflation just firmed and policy already tightened by 0.25 percentage points (the raw gap between two percentages (4% to 5% is 1 ppt)) over the last 30 days.
If GDP (Gross Domestic Product, the total value of everything the US economy produces) comes in well below the recent 2.20% QoQ (compared to last quarter) annualized pace, it would suggest high rates are starting to bite. That would raise the odds of slower hiring and weaker spending by households.
If Initial claims (the number of people who filed for unemployment benefits for the first time that week) jump above the recent 198,500 four-week average for more than one report, it would be an early sign the job market is weakening. That would matter fast because unemployment is still only 4.2%, so labor has room to worsen from here.
If Middle East supply problems keep oil and fuel prices rising, the next inflation reports could stay hot. That would hit gas bills first and could also keep the Fed from easing, even if growth cools.
If the recent inflation pickup fades and the 3-month trend drops back below the yearly pace, markets could start to expect less pressure from the Fed. That would help rate-sensitive areas like housing and lower the risk of borrowing costs staying high for too long.
Claims matter more now because jobs still look steady, so any rise would be one of the first signs growth is losing steam.
If claims jump well above recent readings, recession worries would rise; if they stay low, the economy still looks firm.
This matters most because inflation just heated up and people want to know if the Fed will keep borrowing costs high.
If the Fed sounds tougher than expected, stocks could feel pressure and loan costs could stay high; if it sounds calmer, markets may get relief.
GDP will show whether the economy is still growing near the recent 2.20% pace or starting to slow under high rates.
If GDP is much stronger than expected, rate worries could grow because demand is still strong; if it is much weaker, slowdown fears would rise.
This is the closest scenario because inflation was the clearest mover this week. Core CPI (CPI without food and energy, which move around a lot month to month) is 2.56% YoY (compared to the same time last year), and its 3-month trend is running higher at 2.89%.
Confidence is medium because growth and labor are steady, but we do not have a fresh near-term GDP nowcast to show if momentum changed before the next releases.
A look back at how the economy's signals have shifted week by week.
September CPI (Consumer Price Index, the main measure of how much prices are going up) was 3.74%, cooler than the 4.17% forecast, but up from 3.35% in August. Fighting near key oil routes could lift gas and heating costs for households. Watch next month's CPI report: if core prices keep rising above 3% compared to the same time last year, inflation is heating up again.
PCE (Personal Consumption Expenditures, the inflation measure the Fed watches most) was 3.01%, matching forecasts and down from 3.36% in July. Oil jumped to $105 a barrel, which could raise gas prices soon and slow this cooling trend. Next, watch CPI (Consumer Price Index, the main measure of how much prices are going up). If it rises again, inflation may stop cooling.
PCE, Personal Consumption Expenditures, the inflation measure the Fed watches most, was 3.01%, matching forecasts and down from 3.36% in July. Fighting near the Strait of Hormuz could raise gas and shipping costs, which would squeeze household budgets. Next, watch CPI, Consumer Price Index, the main measure of how much prices are going up. Another drop would support the view that inflation is cooling.
Inflation is cooling, with Core CPI (CPI without food and energy, which move around a lot month to month) at 2.45% YoY (compared to the same time last year). Watch the next inflation report: if core prices move back above 3%, it would suggest price pressure is heating up again.
CPI (Consumer Price Index, the main measure of how much prices are going up) rose 3.4% compared to the same time last year, above 3.25% expected and up from 3.3% in July. Next, watch Core CPI (CPI without food and energy, which move around a lot month to month). If it rises back above July's 2.47%, cooling inflation may be stalling.
CPI, the Consumer Price Index, rose 3.4% compared to the same time last year, hotter than 3.25% expected and up from 3.3% in July. Oil moved above $100 a barrel, which could push up gas and heating costs for households. Watch next month's CPI report: if core prices stay near 2.5% or move lower, the cooling trend would still look intact.