New Bearings Headed into 2026 - Consumption Strong, Rates Ready to Pivot

The week in the United States brought a slew of economic data confirming moderate expansion. The ISM manufacturing PMI fell to 48.2, deepening its contraction due to weakness in new orders and employment, while the ISM services index rose to 52.6, showing that tertiary activity continues to be the main driver of growth. The labor market once again showed a mixed picture: the ADP report recorded a reduction of 32,000 private jobs in November, driven by a drop of 120,000 jobs in small businesses, but weekly unemployment claims fell to their lowest level since 2022, albeit with possible seasonal distortions. Inflation also showed signs of gradual moderation, with core PCE rising 0.2% monthly and 2.8% annually. At the same time, the OECD revised its growth forecast for the United States in 2025 upward to 2%, supported by strong momentum in AI-related investments.

In the markets, consumption surprised on the upside again during the shopping season. Black Friday sales grew 4.1% year-on-year according to Mastercard SpendingPulse, with a notable 10.4% increase in e-commerce. At the same time, money market funds exceeded USD 8 trillion for the first time, reflecting investors' preference for liquidity in an environment of still-high rates and expectations of imminent cuts. In fact, the market assigns a 95% probability that the Federal Reserve will reduce its benchmark rate by 25 basis points at next week's meeting. These movements are interpreted as signs of an economy that is slowing down without yet showing signs of severe stress.

READ MORE