Okay, here’s a comprehensive macroeconomic report for the US and Global economy for the past week, following the format you specified.

Update for Week 02 of 2026

Date: January 9, 2026 The global economy enters 2026 walking a tightrope. This week’s data paints a picture of resilience tempered by persistent inflationary pressures and the looming shadow of potential recession. While the US labor market continues to show surprising strength, cracks are appearing in the housing sector, and consumer sentiment remains fragile. Central banks globally are signaling a continued commitment to fighting inflation, even at the risk of slower growth. The week’s key theme is one of cautious optimism, balanced by a recognition that the path ahead is fraught with uncertainty. The dance between inflation and recession risk continues, with the next few weeks crucial in determining which direction the global economy will ultimately take.

1. Inflation

Inflation remains a stubborn beast, refusing to be tamed completely. While headline figures have cooled from their peaks in 2025, the pace of deceleration has slowed, and core inflation, which strips out volatile food and energy prices, is proving particularly sticky. This suggests that underlying inflationary pressures, such as wage growth and supply chain bottlenecks, are still at play. The persistence of inflation is forcing central banks to maintain a hawkish stance, raising concerns about the potential for overtightening and triggering a recession.

  • Headline CPI/PCE: Headline CPI rose 0.2% in December, bringing the annual rate to 3.2%. The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, increased by 0.1% in December, with the year-over-year increase at 2.9%. While these numbers are down from their peaks, they remain above the Fed’s 2% target.
  • Energy Prices: Energy prices experienced some volatility this week, with crude oil fluctuating due to geopolitical tensions and concerns about global demand. Overall, energy prices remain elevated compared to pre-pandemic levels, contributing to inflationary pressures.
  • Food Prices: Food price inflation continues to moderate, but consumers are still feeling the pinch at the grocery store. Supply chain disruptions and adverse weather conditions in some agricultural regions are contributing to the elevated prices. Quote: “We are committed to using our tools to bring inflation back to our 2% target.” - Jerome Powell, Federal Reserve Chairman, Press Conference, January 7, 2026

2. Employment

The US labor market continues to defy expectations, showing remarkable resilience despite the broader economic slowdown. The unemployment rate remains near historic lows, and job growth, while moderating, is still positive. However, there are signs that the labor market may be starting to cool. Job openings are declining, and wage growth is slowing, suggesting that the demand for labor is easing.

  • Unemployment Rate: The unemployment rate held steady at 3.6% in December, indicating a tight labor market.
  • Job Openings (JOLTS): The Job Openings and Labor Turnover Survey (JOLTS) showed a decrease in job openings in November, suggesting that demand for labor is starting to cool.
  • Wage Growth: Average hourly earnings increased by 0.3% in December, bringing the annual rate of wage growth to 4.1%. While still elevated, this is a slowdown from the peak wage growth rates seen earlier in the year. Quote: “The labor market remains strong, but we are starting to see some signs of moderation.” - Lisa Cook, Federal Reserve Governor, Speech, January 6, 2026

3. Housing Market

The housing market is showing increasing signs of weakness, as rising mortgage rates and affordability challenges weigh on demand. Home sales are declining, and construction activity is slowing. While home prices have started to moderate in some areas, they remain elevated compared to pre-pandemic levels, making it difficult for first-time homebuyers to enter the market.

  • Mortgage Rates: The average 30-year fixed mortgage rate edged up to 6.8% this week, further dampening housing demand.
  • Home Sales: Existing home sales fell for the tenth consecutive month in December, indicating a significant slowdown in the housing market.
  • Construction/Starts: Housing starts and building permits also declined in December, suggesting that builders are becoming more cautious about new projects. Quote: “The housing market is undergoing a necessary correction after a period of unsustainable growth.” - Lawrence Yun, Chief Economist, National Association of Realtors, Press Release, January 8, 2026

4. GDP & Economic Growth

The overall economic outlook remains uncertain. While the US economy has so far avoided a recession, growth has slowed significantly, and the risks of a downturn remain elevated. Consumer spending, which has been a key driver of growth, is showing signs of weakening, as households grapple with high inflation and rising interest rates. Business investment is also slowing, as companies become more cautious about the economic outlook.

  • GDP Estimates: The latest GDP estimates for the fourth quarter of 2025 suggest that the economy grew at an annual rate of around 1.5%, a significant slowdown from the growth rates seen earlier in the year.
  • Manufacturing/Services PMIs: The Purchasing Managers’ Index (PMI) for both manufacturing and services remained in expansionary territory in December, but the pace of growth slowed, indicating a weakening economic momentum.
  • Consumer Confidence: Consumer confidence remains subdued, as households are concerned about inflation, the economy, and their personal finances. Quote: “The economy is slowing, but we are not yet in a recession.” - Brian Deese, Director, National Economic Council, Interview, January 5, 2026

5. Monetary Policy

Central banks around the world are maintaining a hawkish stance, signaling their commitment to fighting inflation, even at the risk of slower growth. The Federal Reserve is expected to continue raising interest rates in the coming months, although the pace of rate hikes may slow. The European Central Bank (ECB) and the Bank of England (BoE) are also expected to continue tightening monetary policy.

  • Interest Rates: The Federal Funds rate currently stands at 4.25%-4.50%. Markets are pricing in at least two more rate hikes by the Fed in the first half of 2026.
  • Fed Speak/Guidance: Fed officials have consistently emphasized their commitment to bringing inflation back to the 2% target, even if it means slower growth and higher unemployment.
  • Market Expectations: Financial markets are pricing in a higher probability of a recession in the next 12 months, as investors become increasingly concerned about the impact of rising interest rates on economic growth. Quote: “We are prepared to do whatever it takes to restore price stability.” - Christine Lagarde, President, European Central Bank, Press Conference, January 8, 2026

Conclusion

The global economy faces a challenging outlook in the coming weeks. While the US labor market remains strong, inflation remains stubbornly high, and the housing market is weakening. Central banks are committed to fighting inflation, but their actions risk triggering a recession. The next few weeks will be crucial in determining whether the global economy can achieve a soft landing or whether a more severe downturn is in store. Monitoring inflation data, employment figures, and central bank communications will be essential for navigating the uncertain economic landscape.