Okay, here’s your macroeconomic report for the week, formatted as requested and incorporating a narrative approach.

Update for Week 51 of 2025

Date: December 19, 2025 The global economy finds itself at a fascinating, if somewhat precarious, juncture. This week’s data paints a picture of resilience tempered by persistent inflationary pressures and the looming shadow of potential policy missteps. While the US labor market continues to display remarkable strength, cracks are beginning to appear in the housing sector, and overall economic growth remains stubbornly moderate. Central banks globally are walking a tightrope, attempting to rein in inflation without triggering a sharp downturn. The narrative this week is one of cautious optimism intertwined with a healthy dose of uncertainty. The key question remains: can central banks engineer a soft landing, or are we destined for a more turbulent descent?

1. Inflation

Inflation remains the dominant economic narrative, although the story is becoming more nuanced. While headline figures show a continued moderation from peak levels, underlying drivers remain stubbornly persistent. Supply chain bottlenecks, while improved, still contribute to upward price pressures, and robust consumer demand continues to fuel inflationary momentum. The energy sector remains a wildcard, with geopolitical tensions adding volatility to crude oil prices.

  • Headline CPI/PCE: The latest CPI data released this week showed a 0.2% increase month-over-month, bringing the annual inflation rate to 3.1%. While this is a significant drop from the highs of early 2025, it’s still well above the Federal Reserve’s 2% target. The PCE Price Index, the Fed’s preferred inflation gauge, also showed a similar trend, increasing 0.1% month-over-month and 2.8% year-over-year. The stickiness of core inflation, which excludes volatile food and energy prices, is particularly concerning, suggesting that underlying inflationary pressures are proving difficult to eradicate.
  • Energy Prices: Energy prices experienced a volatile week, driven primarily by escalating tensions in the Middle East. Crude oil prices briefly spiked above $80 a barrel before settling back down to around $77. This volatility underscores the vulnerability of the global economy to geopolitical shocks and the potential for energy prices to reignite inflationary pressures.
  • Food Prices: Food price inflation continues to moderate, reflecting improvements in agricultural supply chains and easing global demand. However, certain food categories, such as meat and dairy, remain elevated due to persistent supply constraints and rising input costs. Quote: “The last mile in the inflation fight is often the most challenging.” - Jerome Powell, Testimony to Congress, December 17, 2025

2. Employment

The US labor market continues to defy expectations, exhibiting remarkable resilience in the face of rising interest rates and slowing economic growth. However, there are signs that the labor market is beginning to cool, albeit gradually. Job openings have declined from their peak levels, and wage growth has moderated slightly.

  • Unemployment Rate: The unemployment rate remained unchanged at 3.7% this week, hovering near historic lows. This suggests that the labor market remains tight, with employers still facing challenges in finding qualified workers.
  • Job Openings (JOLTS): The latest JOLTS report showed a decline in job openings, indicating a slight easing in labor demand. However, the number of job openings still remains elevated compared to pre-pandemic levels, suggesting that the labor market is far from weak.
  • Wage Growth: Wage growth moderated slightly this week, with average hourly earnings increasing by 0.3%. While this is a welcome sign for policymakers seeking to curb inflation, it also suggests that workers may see a slowdown in their real wage gains in the coming months. Quote: “The labor market is strong, but not as strong as it was six months ago.” - Julia Pollak, Chief Economist, ZipRecruiter, December 18, 2025

3. Housing Market

The housing market continues to grapple with the effects of rising mortgage rates and declining affordability. Home sales have fallen sharply, and construction activity has slowed. However, a shortage of housing inventory is providing some support to prices, preventing a more significant downturn.

  • Mortgage Rates: Mortgage rates remained elevated this week, hovering around 7.25% for a 30-year fixed-rate mortgage. These high rates are deterring potential homebuyers and putting downward pressure on home sales.
  • Home Sales: Existing home sales fell for the fifth consecutive month, reaching their lowest level in over a decade. New home sales also declined, reflecting the weakening demand in the housing market.
  • Construction/Starts: Housing starts and building permits both declined this week, indicating that builders are becoming more cautious in response to the slowing housing market. The construction sector is particularly sensitive to interest rate changes, and the recent rise in mortgage rates has had a significant impact on building activity. Quote: “Affordability is the biggest challenge facing the housing market right now.” - Lawrence Yun, Chief Economist, National Association of Realtors, December 16, 2025

4. GDP & Economic Growth

The US economy continues to grow at a moderate pace, but the outlook remains uncertain. Consumer spending remains a key driver of growth, but rising interest rates and inflation are beginning to weigh on household budgets. Business investment has also slowed, reflecting concerns about the economic outlook.

  • GDP Estimates: The latest GDP estimates suggest that the US economy grew at an annual rate of 2.0% in the third quarter. While this is a solid pace of growth, it is a slowdown from the first half of the year.
  • Manufacturing/Services PMIs: The manufacturing PMI remained in contraction territory this week, indicating that the manufacturing sector is struggling. The services PMI, on the other hand, remained in expansion territory, suggesting that the service sector is holding up relatively well.
  • Consumer Confidence: Consumer confidence edged down slightly this week, reflecting concerns about inflation and the economic outlook. However, consumer confidence remains at a relatively high level, suggesting that consumers are still willing to spend. Quote: “The economy is slowing, but it’s not collapsing.” - Mark Zandi, Chief Economist, Moody’s Analytics, December 15, 2025

5. Monetary Policy

Central banks around the world are grappling with the challenge of reining in inflation without triggering a recession. The Federal Reserve is expected to continue raising interest rates in the coming months, but the pace of rate hikes is likely to slow.

  • Interest Rates: The Federal Reserve is widely expected to raise interest rates by another 25 basis points at its next meeting. This would bring the federal funds rate to a range of 5.25% to 5.50%.
  • Fed Speak/Guidance: Fed officials have been signaling a more cautious approach to rate hikes in recent weeks, acknowledging the risks to economic growth. However, they have also emphasized their commitment to bringing inflation back down to 2%.
  • Market Expectations: Market expectations for future rate hikes have moderated somewhat in recent weeks, reflecting the growing belief that the Fed will soon pause its rate-hiking cycle. However, there is still considerable uncertainty about the future path of interest rates. Quote: “We are committed to using our tools to bring inflation back down to 2%.” - Federal Open Market Committee, Statement, December 14, 2025

Conclusion

The global economy faces a complex and uncertain outlook. While the US labor market remains strong and economic growth continues at a moderate pace, inflation remains stubbornly persistent and the housing market is weakening. Central banks are walking a tightrope, attempting to rein in inflation without triggering a recession. The coming weeks will be crucial in determining whether they can successfully navigate this challenging environment. The key risks to the outlook include a resurgence in inflation, a sharper-than-expected slowdown in economic growth, and a potential policy mistake by central banks. Vigilance and adaptability will be paramount in navigating the economic landscape ahead.