Hello, my friends!

To the surprise of no one, this economic week proved to be another heavily influenced by the Iran war and related developments in the Middle East. Oil prices were greatly impacted, of course, with Brent futures closing above $100 per barrel on Thursday for the first time since August 2022.

Stocks again wilted under the pressure of spiking oil prices and broader war-induced uncertainty this week. The S&P 500 sank 1.6% to close at 6,632.19 on Friday, while the Dow Jones Industrial Index tumbled roughly 2% to land at 46,558.47. For its part, the tech-heavy Nasdaq Composite fell 1.3% to close the week out at 22,105.36.

As for this week’s array of scheduled economic data reveals, it turned out to be “inflation week” with the releases of the economy’s two most prominent price-pressure measures – the consumer price index (CPI) and the personal consumption expenditures (PCE) price index – coming just days apart.

It’s unusual for us to see the data generated by these high-profile inflation gauges revealed in quick succession, but ongoing backlogs caused by the government shutdown conspired to make it happen; while CPI is back on its normal schedule, the PCE report, which normally comes out at the end of each calendar month, remains about two weeks behind schedule.

First up this week was CPI for February, which showed that while price pressures continue to struggle in their effort to get all the way back to the 2% target, neither do they seem prone to intensifying in the face of ongoing tariff pressures.

According to the Labor Department’s report, released Wednesday, headline CPI increased by 0.3% on a monthly basis in February while annual inflation rose at a pace of 2.4%. Both numbers were in line with estimates.

As for core CPI, which excludes more volatile food and energy prices, that climbed 0.2% for the month and 2.5% year over year. Those numbers also matched economists’ projections.

Notably, the annual rates for both headline and core CPI remained unchanged from January.

Overall, the report suggested a prevailing stability in consumer prices, including within the notoriously challenging shelter category. The shelter index stood fast on its January readings, rising 0.2% monthly and 3.0% for the year.

That said, many observers think the continued stabilization of prices is now suddenly at risk from an oil shock triggered by the Iran conflict, with Sonu Varghese, chief macro strategist for the Carson Group, telling CNBC:

“CPI inflation for February was along expectations but this is the calm before the storm that will show up due to surging gasoline prices in March.”

Commerce Department’s Inflation Gauge Confirms Ongoing Price-Pressure “Stickiness”

It was more of the same on Friday with the release of the shutdown-delayed personal consumption expenditures price index for January, which – like February’s CPI data – showed inflation still perched comfortably above the 2% target level.

According to the Commerce Department’s report, headline, or all-items, PCE rose 0.3% on a monthly basis in January while climbing at a year-over-year pace of 2.8%.

Core PCE moved even faster, spiking 0.4% from December while increasing at an annual rate of 3.1%. Notably, the year-over-year core rate represented a slight acceleration from the 3.0% pace both notched in December and projected by economists for January.

Although this latest round of PCE data was reflective of January’s…rather than last month’s…price activity, the data, coming as it did on the heels of the uninspiring February CPI numbers, seemed to reiterate analysts’ lack of confidence in the idea that inflation is nearly at an end.

Citing headline PCE’s monthly 0.3% increase, Jeffrey Roach, chief economist at LPL Financial, said investors “need to see monthly prints stay consistently in the range of 0.1% and 0.2% before they can realistically believe inflation risks are mostly contained,” but suggested such numbers are likely to remain elusive through at least the near term, noting:

“Underlying inflation pressures will continue to boil under the surface and next month’s print will also be impacted by the war in the Middle East.”

Business Owner Sentiment Dropped in February…but So Did Uncertainty

Also this week, the nation’s leading advocacy group for small and independent businesses said its most recent survey of members found that while overall sentiment declined modestly last month, key component data suggests they may feel more confident about what lies ahead.

On Tuesday, the National Federation of Independent Business reported that its headline Small Business Optimism Index landed at 98.8 in February…a 0.5 percentage point drop from January’s number but still above the metric’s historical average of 98.

Survey data revealed the broader index was weighed down by concerns about future sales expectations as well as hiring in the months ahead. The share of firms expecting to increase payrolls fell to its lowest level since last May.

But the report was not without its silver linings. For one thing, despite the diminished expectations for sales going forward, sales volumes actually rose in February. So did positive profit trends, up seven points from January. And while labor quality was again cited by small business owners as their single most important problem in February, the percentage saying so – 15% – is the lowest it’s been since April 2020.

Notable, too, is that the Uncertainty Index, a collateral measure of the headline Optimism Index, decreased three points last month to 88. The drop in uncertainty among business owners is something that NFIB chief economist Bill Dunkelberg made sure to mention in his official statement on the February survey results:

“Although optimism declined slightly, small businesses report feeling more certain in February as they look toward the coming months. High sales and increased profits made February a more positive month for many owners, but competition from large businesses is putting stress on Main Street firms as they navigate the current economic climate.”

Consumer Sentiment Loses Expected March Gains to Outbreak of Iran War

Finally this week, the preliminary March reading of the highly regarded University of Michigan Consumer Sentiment Index saw that metric decline modestly from January amid fast-growing concerns about the Iran war.

According to the data, the index ticked down to 55.5 this month from February’s measure of 56.6. One consensus estimate projected the index would improve slightly this month to 56.8.

Indeed, the index was poised to climb this month before the outbreak of hostilities in the Middle East, survey director Joanne Hsu confirmed. But that changed as survey feedback quickly began to reflect a surge of war-generated uncertainty. 

“Interviews completed prior to the military action in Iran showed an improvement in sentiment from last month, but lower readings seen during the nine days thereafter completely erased those initial gains,” Hsu said.

Despite the dip in sentiment, consumers’ one- and five-year inflation expectations remained largely unchanged from February. The 12-month outlook held steady at 3.4%, while the longer-run projection actually fell 0.1 percentage point to 3.2%. However, both outlooks remain well above the 2.3%-3.0% range that characterized the years leading up to the pandemic.

That’s it for now; have a terrific weekend!

This post is created and published for general information purposes only. The Gold Strategist blog disclaims responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this post – or any other post featured at this blog – should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.

Hello, my friends!

When it came to this week’s economic data releases, jobs numbers took center stage, led by the surprisingly disappointing government nonfarm payrolls report for February.

On Friday, the Bureau of Labor Statistics announced the economy lost 92,000 jobs last month, far below January’s downwardly revised gain of 126,000 jobs and also well off the consensus estimate of an increase by 60,000. February’s total marks the third time in the previous five months the economy has lost jobs, according to the Labor Department’s official numbers.

Unsurprisingly, the headline unemployment rate ticked up last month, climbing back to 4.4% after dropping to 4.3% in January.

Among the sectors that saw the biggest declines was manufacturing, which lost 12,000 jobs, as well as information services, which shed 11,000 jobs due in part to the ever-expanding footprint of artificial intelligence. Federal payrolls tanked by another 10,000 in February as the White House effort to reduce government bloat continues.

Analysts say a wave of particularly harsh winter weather contributed to the especially poor report as did a strike at health care giant Kaiser Permanente, which took more than 30,000 workers off the job in Hawaii and California last month. That work stoppage has since been resolved, but for the purposes of the report, it was largely responsible for a loss of 28,000 jobs in the health care sector.

However, while observers readily agree that both the strike and the weather challenges made their mark on the data, some say there remains good reason to be concerned about the underlying strength of the economy.

“Looking through the weather-impacted sectors and the strike, which ended on February 23, this is still a poor jobs number,” Jefferies economist Thomas Simons said. “We do not think that this is a harbinger of progressively worse jobs prints coming down the road, but the risk of a downturn has certainly increased.”

ADP Says Private Payrolls Increased by 63,000 Last Month

Earlier in the week, another widely followed jobs release, the National Employment Report from payroll processor ADP, had a somewhat more upbeat take on the condition of the labor market, detailing on Wednesday that the private sector added 63,000 jobs in February. That number is much improved from the downwardly revised total of 11,000 jobs picked up last month and also solidly higher than the estimate of 42,000 new jobs that observers had expected to see.

Still, enthusiasm about the numbers was tempered somewhat by the fact that most of the job gains came from just two sectors, suggesting it may be premature to declare that the worst of this cycle’s labor market softness is squarely behind us (especially in light of the government’s dour report).

Leading the surge upward was the education and health services industry, which added 58,000 jobs this month. Also seeing gains was construction (+19,000) as well as information services (+11,000).

On the downside, the professional and business services sector tanked by 30,000 jobs, while manufacturing gave up 5,000 positions. Trade, transportation and utilities shed another 1,000.

Most of the rest of the nation’s industrial sectors saw little in the way of job-growth changes last month.

Referencing the relative lack of industry breadth in job gains, ADP chief economist Nela Richardson said:

“We’ve seen an increase in hiring and pay gains remain solid, especially for job-stayers. But with hiring concentrated in only a few sectors, our data shows no widespread pay benefit from changing jobs. In fact, the pay premium for switching employers hit a record low in February.”

Retail Sales Data for January Decidedly Mixed

Also this week, the Census Bureau announced that retail sales declined 0.2% in January to a seasonally adjusted total of $733.5 billion. That’s slightly better than the 0.3% decline projected by economists…but also the third time in the last four data months headline sales have either been flat or lost ground.

To be clear, the complete picture is a bit more nuanced, with sales ex. automobiles and related sectors (stripped out because of their tendency toward volatility) actually rising 0.3% in January. Another more comprehensive core measure of retail sales known as the “control group” – which excludes not only auto-related industries but volatility-prone building materials and food services, as well – also climbed 0.3%.

At this point, the jury’s still out as far as how sales may fare, going forward. Those analysts fixated more on the headline numbers warn that the economy could ill afford persistent signs of weakness in consumer spending, which accounts for roughly 70% of gross domestic product (GDP).

Still others, like Nationwide senior economist Ben Ayers, believe consumer spending remains foundationally secure right now. Commenting shortly after the release of the latest numbers, Ayers said any signs of spending fragility likely are an “aberration” and added that an expected uptick in the size of federal tax refunds this season “should help to fuel renewed purchase behavior this spring.”

Fed’s Latest Beige Book Suggests U.S. Economy Is Stable – but Far From Solid

Finally this week, the Federal Reserve on Wednesday published the second of its eight Beige Books for 2026, which revealed that the nation’s business community, overall, believes the economy to be on stable, if not particularly solid, ground.

Fed Beige Books, named for the color of their covers, contain more qualitative – even anecdotal – information about the condition of the economy across the central bank’s 12 districts. The feedback is gathered from interviews with business contacts and other key observers in each district and published two weeks prior to the Federal Open Market Committee’s policy meetings.

It’s worth noting that because the information-gathering cutoff date for this edition was February 23, little of what’s contained is reflective of more recent and momentous developments, such as the Supreme Court’s overturning of some White House tariffs or the latest round of Middle East turmoil. But up to that point, at least, a majority of Fed districts reported a mild uptick in economic activity.

According to the summary, seven of the 12 Fed districts experienced modest increases in growth, while five reported growth levels that landed somewhere between “flat” and “declining.”

Among the areas of particular concern noted by the businesses surveyed include labor-market strength. The Dallas Fed, for example, found that the majorities of manufacturing and services businesses in its district aren’t looking to hire right now, while the San Francisco Fed said some businesses there are even looking for ways to shed payrolls.

Inflation clearly remains another antagonist to growth, with all 12 districts reporting price increases. Some businesses said that while they had done what they could up to this point to keep consumers from bearing the brunt of tariff-induced price increases, they were going to have little choice but to pass along more of the burden in 2026.

That’s it for now; have a phenomenal weekend!

This post is created and published for general information purposes only. The Gold Strategist blog disclaims responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this post – or any other post featured at this blog – should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.