{"id":240317,"date":"2026-03-17T11:00:19","date_gmt":"2026-03-17T15:00:19","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=240317"},"modified":"2026-03-18T05:37:46","modified_gmt":"2026-03-18T09:37:46","slug":"economic-update-week-of-march-16-2026","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/economic-update-week-of-march-16-2026\/","title":{"rendered":"Economic Update: Week of March 16, 2026"},"content":{"rendered":"\n

NEW THIS WEEK<\/p>\n\n\n\n

Growth<\/h2>\n\n\n\n

The U.S. economy grew by a downwardly revised 0.7% saar in 4Q25. A very sharp 17% annualized decline in federal government spending was the main culprit for the weak report, and final sales to private domestic purchasers rose by 1.9%. Consumer spending was revised lower to 2% growth, down from 3.5% in 3Q25. Fixed investment rose by a downwardly revised 1.6% as business investment on structures was weaker than initially thought. On the other hand, spending on equipment and intellectual property showed solid gains. Fiscal stimulus should lead to stronger growth in 2Q and 3Q26.<\/p>\n\n\n\n

Jobs<\/h2>\n\n\n\n

The February jobs report looked weak, with nonfarm payrolls falling by 92k. A pick-up in strike activity was partially to blame but revisions to previous months were also downbeat. 69k jobs were removed from December and January, bringing the three-month moving average down to 6k from 50k in January. Similarly, private payrolls fell to 18k from 70k. Private services payroll growth excluding health care and social assistance was also the weakest since last June. After falling for two months, the unemployment rate rose 12bps to 4.4%. Sluggish labor force growth should keep the unemployment rate under control, but this report reminds us that upside risks remain. Despite this weak report, upside risks to inflation lead us to believe that there won’t be any Fed easing until late 2026.<\/p>\n\n\n\n

Profits<\/h2>\n\n\n\n

S&P 500 EPS grew a strong 13.3% y\/y in 4Q25, 6 percentage points above the December estimate. The three main sources of EPS growth, sales, margins and shares, contributed 8.2, 5.9 and -0.9 percentage points, respectively. From a sector perspective, tech did the heavy lifting, driving 61% of the index’s y\/y EPS growth. Financials and industrials also saw strong earnings growth of 27.8% and 7.7%, respectively. On the other hand, the consumer and health care sectors are struggling as rising costs hurt profitability. The outlook for 2026 earnings growth is similarly strong with continued gains in tech and cyclical support for the rest of the index.<\/p>\n\n\n\n

NEW THIS WEEK<\/p>\n\n\n\n

Inflation<\/h2>\n\n\n\n

The February CPI report had some favorable developments, but it reflects a different world than the one we are in today. The conflict in the Middle East has only added to upside inflation risks. Headline and core inflation were up 2.4% and 2.5% y\/y, respectively, in February, matching expectations. In the details, it looks like energy and food inflation firmed, even ahead of the conflict. Core goods prices rose a tepid 0.1% m\/m as used autos continued to decline while core services inflation slowed as shelter remained soft. However, some of this softness should fade alongside the impacts of the government shutdown come April. With upside inflation risks from fiscal stimulus, delayed tariff pass-through and now this conflict, inflation could bounce to 3.5% in mid-2026 before resuming its gradual decline back to 2%.<\/p>\n\n\n\n

Rates<\/h2>\n\n\n\n

At its first meeting of 2026, the Federal Reserve voted to leave the federal funds rate unchanged at a target range of 3.50%\u20133.75%, although Governors Miran and Waller voted in favor of a 25bp cut. New statement language leaned hawkish, with economic activity described as “solid” and the unemployment rate “showing signs of stabilization.” During the press conference, Powell noted that the most likely next move remains a cut, but only after it becomes clear the inflationary effects of tariffs will be temporary. The Fed is well positioned to remain on hold through 1H26 at least, and will likely maintain its current policy stance until the balance of risks, as evidenced by incoming data, decisively favors action on one side of its dual mandate.<\/p>\n\n\n\n

Risks<\/h2>\n\n\n\n