Economic Review 2 March 2026

Summary

Equities were mixed, showing weakness in the U.S., but strength internationally. Bonds gained as investors moved away from risk. Commodities also gained, continuing recent strong trends in metals.

Economic Notes

(-) The Producer Price Index rose by 0.5% in January, exceeding the median forecast calling for 0.3%. Removing food and energy, core PPI rose a stronger 0.8%, also exceeding expectations of 0.3%. On a headline basis, momentum was driven down by energy prices down -2.7% and food by -1.5%. Overall, goods prices fell by -0.3%, while services prices rose by 0.8%. In the latter, gains in passenger airfares and health care were significant contributors, but there is always a caveat for the January report for PPI and CPI concerning end-of-year prices bumps, which are common and elevate the monthly figure more than normal. Year-over-year, headline and core PPI rose by 2.9% and 3.6%, respectively, continuing to show higher growth. By segment, final demand goods rose 1.6%, while services rose 3.4%, in keeping with consumer price trends as well.

(0) Construction spending rose by 0.3% for December, which included a -0.2% decline for November, which had been delayed due to the government shutdown. For December, private spending rose 0.5% in total, including residential up 1.5% but non-residential down -0.7%. Public spending fell -0.5% overall, with residential down -2.7% and non-residential down -0.4%. Total construction spending was down -0.4% over the past 12 months on a nominal basis, with a -1.2% drop in residential offset a bit by a 0.3% rise in non-residential, with power leading the way (as part of the AI) theme, as well as transportation.

(+/0) The FHFA house price index rose 0.1% in December and 0.8% in Q4 of 2025. Quarterly results were led by East North Central (Great Lakes states, up 1.5%) while Pacific (0.3%) saw the weakest gains. The national index rose 1.8% for the calendar year, which was significantly lower than the 4.6% reading for 2024, and continuing a steady deceleration over the past several years since 2021. By census region, the largest one year gains of around 5% were in East North Central and Middle Atlantic (NJ/NY/PA), followed by a 4% rise in West North Central (ND to MO). The Mountain (MT to AZ) and Pacific regions lagged with declines of about a half-percent each. By state, ND, DE, and IL each saw home price gains over 6% for the year to lead the individual results, while prices in FL fell by nearly -3% for the year. Home price gains remain positive but have now fallen below the rate of broad inflation, taking the ‘real’ appreciation into the negative, which is unusual for residential real estate, but reflects a continued give-back of strong pandemic gains.

(0) The S&P Cotality Case-Shiller 20-city home price index rose 0.5% in December on a seasonally-adjusted basis but fell -0.1% on an unadjusted basis. Year-over-year, the 20-city index rose 1.4%

nationally, which also displayed negative after-inflation real growth. Leaders included over-5% gains in Chicago and New York City, followed by Cleveland, up 4%; laggards were Tampa and Denver, each down several percent. Per S&P, 2025 results saw the weakest full-year gain since 2011, with continued deceleration in this index as well. Also noted was the continued outperformance of Midwest and Northeast markets, while Sun Belt city prices continued to correct. High mortgage rates were blamed as a key culprit for the overall cooling, as has been noted many times.

(+) The Conference Board index of consumer confidence rose by 2.2 points in February to 91.2, above expectations calling for a slight drop to 87.1, following a January reading that had been revised up by over 4 points. While assessments of present conditions fell by -2 points, expectations for the future rose by nearly 5 points. The labor differential ticked up a fraction of a point along with increases in the extremes of jobs being plentiful yet also harder to get. Inflation expectations for the coming 12 months fell by a tenth to a still-elevated 5.5% level. The narratives written in by respondents noted a continued pessimistic tone on the economy, with negativity focused on “prices,

(+) Initial jobless claims for the Feb. 21 ending week rose by 4k to 212k, below the median forecast calling for 216k. Continuing claims for the Feb. 14 week fell by -31k to 1.833 mil., well below the 1.858 mil. expected. Despite some other national measures of layoffs rising in recent months, that trend hasn’t been reflected in the claims data.