Growth
GDP, the consumer, financial conditions and housing
GDP
Real output, quarter on quarter at an annual rate and year on year
Real GDP, quarterly, annualised
2.2%
1 yr
↓ -1.8%
Real GDP, year on year
2.2%
1 yr
↓ -0.2%
Real GDP
24.41 T$
1 yr
↑ +0.52 T$
Quarterly growth, annualised
Source: BEA, via FRED
Year on year
Source: BEA, via FRED
Notes
- What is happening
- Real GDP grew 2.2% at an annual rate in the second quarter of 2026 (the third estimate of 30 September, up from 1.5%), after 2.5% in the first. Year on year, growth is 2.2%, for an economy of $24.4 trillion in 2017 dollars.
- Why it matters
- GDP is the arbiter: it decides whether the labour market's slowdown is a soft landing or the start of a recession, and sets the tax receipts on which the debt path depends.
- What's driving it
- Consumption holding at 2%, investment in data centres and AI equipment, and a trade balance swinging with tariffs; housing and manufacturing no longer contribute.
- What to watch
- Two consecutive quarters below 1% would tip the debate towards recession; year-on-year growth above 2.5% with inflation at 3% would say the economy does not need rate cuts.
Consumer Demand
What households are buying, after inflation, and how they feel about it
Real consumer spending, year on year
2.6%
1 mo
↑ +0.3%
1 yr
↓ -0.3%
Real retail sales, year on year
2.5%
1 mo
↑ +0.3%
1 yr
↑ +1.8%
Consumer sentiment (Michigan)
51.7
1 mo
↓ -3.5
1 yr
↓ -6.5
Real spending and retail sales
Source: BEA and Census Bureau, via FRED
Consumer sentiment
Source: University of Michigan, via FRED
Notes
- What is happening
- Real consumer spending is up 2.6% on the year in August, real retail sales 2.6% as well. Consumer sentiment fell back to 51.7 in August, after 55.2 in July and a record low of 44.8 in May.
- Why it matters
- Consumption is two thirds of US GDP; while it holds, there is no recession. Sentiment says what households think about prices and jobs before their spending shows it.
- What's driving it
- Real wages nearly flat, a wealth effect from equities and housing for affluent households, and exhausted pandemic savings for the rest; the gap between sentiment and spending is the widest since the 1970s.
- What to watch
- Real consumption below 1% on the year has coincided with every recession since 1960; sentiment back above 70 would say the price shock has been digested.
Financial Conditions
The Chicago Fed's index of money, debt and equity markets: zero is average, above zero tighter than average, below looser
Financial conditions index (NFCI)
-0.50
1 wk
↑ +0.01
1 mo
↑ +0.04
1 yr
↑ +0.02
Adjusted index (ANFCI)
-0.49
1 wk
↑ +0.01
1 mo
↑ +0.06
1 yr
↑ +0.08
Source: Chicago Fed, via FRED
Notes
- What is happening
- The Chicago Fed's financial conditions index is −0.49 in the week of 2 October, the adjusted index −0.50: conditions looser than average, and barely tighter than before the Fed's rate hike (−0.56 on 11 September).
- Why it matters
- Financial conditions, not the policy rate, are what reach the economy: credit spreads, equity valuations, the dollar, credit availability. A Fed that is restrictive on paper with loose conditions is not restraining anything.
- What's driving it
- High-yield credit spreads at their tightest since 2007, equities at records on AI, and low volatility; the market had priced the September hike well in advance.
- What to watch
- A move above zero has accompanied every stress episode since 1971; above 0.5, credit shuts and the Fed has to respond. While the index stays below −0.3, markets are doing the opposite of monetary policy's work.
Housing
Starts, permits and new home sales, home prices, and the mortgage rate that drives them
Housing starts (thousands, annual rate)
1,275
1 mo
↓ -34
1 yr
↓ -16
Building permits (thousands, annual rate)
1,403
1 mo
↓ -30
1 yr
↑ +56
New home sales (thousands, annual rate)
684
1 mo
↑ +41
1 yr
↓ -14
Case-Shiller home prices, year on year
1.9%
1 mo
↑ +0.3%
1 yr
↑ +0.3%
30-year fixed mortgage rate
7.40%
1 wk
+0.00%
1 mo
↑ +0.64%
1 yr
↑ +1.10%
Starts, permits and new home sales
Source: Census Bureau, via FRED
Home prices
Source: S&P Case-Shiller, via FRED
30-year mortgage rate
Source: Freddie Mac, via FRED
Notes
- What is happening
- 1.28 million housing starts at an annual rate in August, 1.40 million permits, 684,000 new home sales in August. Case-Shiller prices are up 1.9% on the year in July, below inflation; the 30-year mortgage rate reached 7.40% on 8 October, its highest since late 2023, from 6.66% in late August.
- Why it matters
- Housing is the most rate-sensitive sector and the first to turn; it weighs on GDP through construction and on inflation through rents, a third of the CPI.
- What's driving it
- A mortgage rate above 6.5% for three years that locks in owners who borrowed at 3%, a surplus of new homes in the South, and real prices falling without nominal prices giving way.
- What to watch
- Starts below 1.2 million preceded the recessions of 1990, 2001 and 2008; a mortgage rate below 6% would reopen the resale market and lift prices again.