Okay, here’s your macroeconomic report for the third week of January 2026.

Update for Week 03 of 2026

Date: January 16, 2026 The global economy finds itself at a fascinating, albeit precarious, juncture. The past week painted a picture of resilience tempered by persistent inflationary pressures and uncertainties surrounding the pace of economic growth. In the US, the labor market continues to show remarkable strength, defying expectations of a significant slowdown. However, this strength is a double-edged sword, potentially fueling further inflation. The housing market remains sensitive to interest rate fluctuations, and while there are signs of stabilization, affordability remains a major concern. Globally, concerns about supply chain disruptions and geopolitical tensions continue to cast a shadow on the economic outlook. Central banks are walking a tightrope, attempting to balance the need to curb inflation with the desire to avoid triggering a recession. The week’s data suggests that this balancing act will become increasingly challenging in the coming months.

1. Inflation

Inflation remains a primary concern, even though we’ve seen some moderation from the peaks of the past couple of years. The stickiness of certain components, particularly services, is proving to be a challenge for policymakers.

• Headline CPI/PCE: The Consumer Price Index (CPI) rose by 0.3% in December, bringing the annual inflation rate to 3.2%. The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, increased by 0.2% for the month and 2.9% year-over-year. While these figures represent a significant decrease from the highs of 2024 and early 2025, they remain above the Fed’s 2% target. The persistence of inflation suggests that the disinflationary process may be slower and more uneven than initially anticipated.
• Energy Prices: Energy prices have been volatile, influenced by geopolitical tensions and supply-side constraints. Crude oil prices saw a slight increase this week, driven by concerns about potential disruptions in the Middle East. This volatility adds uncertainty to the inflation outlook, as energy costs have a significant impact on transportation and production costs across the economy.
• Food Prices: Food price inflation has moderated somewhat, but consumers are still feeling the pinch at the grocery store. Supply chain improvements and easing commodity prices have contributed to the slowdown in food price increases. However, weather-related events and geopolitical factors could still pose risks to food prices in the coming months. Quote: “We are committed to achieving our 2% inflation goal, and we will use our tools to bring inflation back down to that level.” - Jerome Powell, Press Conference, Federal Reserve, January 15, 2026

2. Employment

The labor market continues to be a bright spot in the US economy, defying expectations of a significant slowdown. However, the strength of the labor market also poses a challenge for the Fed, as it could contribute to wage pressures and further inflation.

• Unemployment Rate: The unemployment rate remained at a historically low 3.7% in December. This indicates a tight labor market with strong demand for workers.
• Job Openings (JOLTS): The Job Openings and Labor Turnover Survey (JOLTS) data showed that job openings remained elevated, although slightly down from previous months. This suggests that employers are still actively seeking to fill positions, indicating continued strength in the labor market.
• Wage Growth: Wage growth has moderated slightly in recent months, but it remains above pre-pandemic levels. The tight labor market is still putting upward pressure on wages, which could contribute to inflationary pressures. Quote: “The labor market remains strong, but we are starting to see some signs of moderation in wage growth.” - Lisa Cook, Speech on the Economic Outlook, Federal Reserve, January 14, 2026

3. Housing Market

The housing market remains sensitive to interest rate fluctuations, and affordability remains a major concern for many potential buyers.

• Mortgage Rates: Mortgage rates have fluctuated in recent weeks, influenced by expectations about the Fed’s monetary policy. The average 30-year fixed mortgage rate currently stands at around 6.8%, which is still significantly higher than the rates seen in 2021 and 2022.
• Home Sales: Home sales have remained subdued, reflecting the impact of higher mortgage rates on affordability. Existing home sales saw a slight increase in December, but they are still down significantly from a year ago.
• Construction/Starts: Housing starts have also been affected by higher interest rates and concerns about the economic outlook. New residential construction projects have slowed down, indicating a cooling in the housing market. Quote: “The housing market is adjusting to higher interest rates, and affordability remains a key challenge for many buyers.” - Lawrence Yun, Chief Economist, National Association of Realtors, January 13, 2026

4. GDP & Economic Growth

The overall economic outlook remains uncertain, with concerns about a potential recession looming. While consumer spending has remained relatively resilient, business investment has been more subdued.

• GDP Estimates: GDP growth for the fourth quarter of 2025 is estimated to be around 2.5%, according to the Atlanta Fed’s GDPNow model. This would represent a slowdown from the growth rates seen in the first half of the year.
• Manufacturing/Services PMIs: The Purchasing Managers’ Index (PMI) for manufacturing remained in contraction territory, indicating weakness in the manufacturing sector. The services PMI, on the other hand, remained in expansion territory, suggesting that the service sector is still holding up relatively well.
• Consumer Confidence: Consumer confidence has fluctuated in recent months, influenced by concerns about inflation and the economic outlook. The latest consumer confidence index showed a slight increase, but it remains below pre-pandemic levels. Quote: “The economy is facing headwinds from higher interest rates and global uncertainties, but consumer spending has remained surprisingly resilient.” - David Kelly, Chief Global Strategist, JP Morgan Asset Management, January 12, 2026

5. Monetary Policy

Central banks around the world are grappling with the challenge of curbing inflation without triggering a recession. The Fed is expected to continue its data-dependent approach to monetary policy, closely monitoring inflation and labor market data.

• Interest Rates: The Federal Reserve has raised interest rates aggressively over the past year, and the current federal funds rate target range is 5.25% - 5.50%.
• Fed Speak/Guidance: Fed officials have signaled that they are prepared to raise interest rates further if necessary to bring inflation back down to their 2% target. However, they have also emphasized that they will be data-dependent and will carefully assess the impact of their policy decisions on the economy.
• Market Expectations: Market expectations for future Fed policy have been volatile, influenced by incoming economic data and Fed communications. Investors are closely watching for clues about the Fed’s next move, and there is considerable uncertainty about the path of interest rates in the coming months. Quote: “We are committed to restoring price stability, and we will do what it takes to achieve our goals.” - John Williams, Interview on Monetary Policy, Federal Reserve Bank of New York, January 10, 2026

Conclusion

The week’s data paints a mixed picture of the US and global economies. While the labor market remains strong, inflation remains a persistent concern, and the housing market is struggling with affordability. The overall economic outlook is uncertain, and central banks face a challenging balancing act in the coming months. Investors should remain vigilant and prepared for potential volatility as the economic landscape continues to evolve. The next few weeks will be critical in determining whether the economy can achieve a soft landing or whether a recession is inevitable.