US Economy: Weekly Commentary – April 13, 2026

Market Review

Yields fell then recovered on inflation and oil dynamics. Equities rose broadly. Dollar weakened. Oil dropped sharply. Gold extended gains. Bitcoin advanced. Overall risk sentiment improved.

Yields declined sharply following the ceasefire, driven by lower oil prices, but partially recovered by the end of the week amid persistent inflation concerns and still-elevated crude levels. The 30-year Treasury yield underperformed shorter-maturity yields, rising 4 basis points over the week, while medium-term bonds finished slightly lower.

US equity markets ended the week higher across the board. Micro-cap stocks led gains with a 4.15% increase, followed by small-cap stocks (+3.98%) and large-cap stocks (+3.55%). The Magnificent 7 advanced 4.95%. Sector performance was broadly positive, with the notable exception of the energy sector, which declined 3.90%.

In currency and commodity markets, the US dollar weakened 1.75% against the euro. WTI crude oil fell 14.66% amid easing geopolitical risk, as ceasefire developments involving the US and Iran raised expectations of a potential reopening of the Strait of Hormuz and increased global supply flows. Gold rose 1.45%, extending its gains for a third consecutive week and bringing its cumulative increase to over 18% from the March 23 lows. Bitcoin gained 8.85% over the week.

US Market Views Synopsis

U.S. growth slowed sharply, while inflation remains elevated. Energy driven price increases may be temporary, but weak sentiment and high uncertainty keep the Federal Reserve cautious, delaying rate cuts.

U.S. economic conditions show slowing growth alongside persistent inflation pressures. GDP growth for Q4 2025 was revised down sharply to 0.5%, signaling a clear loss of momentum. At the same time, inflation remains elevated, with PCE at 2.8% year over year and core inflation at 3.0%, keeping the Federal Reserve cautious and unlikely to cut rates soon. Recent CPI increases were driven mainly by a surge in gasoline prices, while underlying inflation stayed more contained, suggesting pressures may be temporary. Higher energy costs, partly linked to geopolitical tensions, are expected to weigh on consumer spending. Consumer sentiment has declined across all groups due to concerns about high prices, conflict, and economic uncertainty, while inflation expectations have risen. Overall, the outlook points to weak growth, near term inflation risks, and a cautious policy stance, with possible stabilization if supply pressures ease.

GDP

U.S. GDP slows sharply to 0.5% in Q4, while PCE inflation stays elevated at 2.8% with sticky core pressures, keeping the Fed cautious on rate cuts.

U.S. macroeconomic data point to a marked slowdown in growth alongside still-elevated inflation pressures. U.S. GDP for Q4 2025 was revised sharply lower to 0.5%, down from earlier estimates near 2.8% and a significant deceleration from 4.4% growth in Q3, underscoring weakening momentum in activity heading into 2026. Against this backdrop, inflation data for February showed the personal consumption expenditures price index rising 0.4% after a 0.3% gain in January, in line with expectations, while core PCE also increased 0.4% for a third consecutive month, leaving headline inflation at 2.8% YoY and core at 3.0%. Consensus forecasts point to a slight near-term uptick in monthly core inflation to 0.4% from 0.3%, alongside a modest easing in the annual rate to 3.0% from 3.1%, with headline inflation expected at 0.4% month-on-month and 2.8% year-on-year. Inflation risks are tilted higher into March amid geopolitical disruptions from the war involving Iran, which has pushed energy prices higher and lifted U.S. gasoline above $4 per gallon for the first time in over three years, raising concerns about spillovers into food and core categories. Consumer spending remains relatively resilient, rising 0.5% in February after a 0.3% increase in January, matching expectations, although higher fuel costs may begin to weigh on discretionary consumption even as tax refunds provide some support to lower-income households and weaker equity markets could dampen spending among higher-income cohorts. Overall, inflation remains above the Federal Reserve’s 2% target, with policymakers remaining cautious on the outlook for price stability, keeping the benchmark rate in the 3.50%–3.75% range and sharply reducing expectations for near-term rate cuts.

We expect weakening growth and persistent inflation to keep the Fed on hold, with no rate cuts at least in the first half of the year.

Inflation

US inflation rise is driven mainly by gasoline prices. Core pressures remain subdued. This suggests limited persistence. It supports expectations of transitory inflation and potential easing.

US inflation is more likely to prove transitory this time, as the March CPI increase was driven overwhelmingly by a sharp rise in gasoline prices, while underlying inflation pressures remained notably more contained than expected. Headline CPI rose 0.9% MoM, with gasoline prices surging 21.2% MoM and contributing most of the upside, alongside smaller increases in airline fares (2.7% MoM) and apparel (1.0% MoM). In contrast, core CPI rose just 0.2% MoM (2.6% YoY), below consensus expectations of 0.3% MoM (2.7% YoY), reflecting softer-than-feared price dynamics across key categories, including a 0.4% decline in used cars, a 0.2% fall in medical care, and a 0.4% drop in “other goods and services,” while housing, still the largest component by weight, rose a steady 0.3% MoM. More broadly, core goods inflation remains subdued at around 1.2% YoY, suggesting limited pass-through from tariffs and indicating that much of the adjustment is being absorbed by corporate margins rather than fully passed on to consumers. This contrasts sharply with the 2021–22 inflation episode, when broad-based supply chain disruptions coincided with exceptionally strong demand, including rapid job creation (around 4.5 million payroll gains), wage growth near 6%, elevated savings buffers, and fiscal stimulus, ultimately forcing the Federal Reserve into an aggressive 525bp tightening cycle as inflation approached 10%. Today, however, the macro backdrop is materially different, with a cooler labour market, wage growth closer to 3%, weaker consumer confidence, and flat to declining real disposable incomes, limiting the risk of sustained second-round inflation effects. Rising fuel costs are therefore more likely to act as a drag on discretionary spending and overall demand rather than a catalyst for persistent inflation, especially as real incomes come under pressure.

We expect US inflation to increase in the near term due to geopolitical conflict, which could push energy prices higher and gradually transmit into other sectors, with no rate cuts anticipated in the first half of the year.

Consumer Sentiment

Consumer sentiment fell broadly across all groups. Driven by conflict concerns and high prices. Inflation expectations rose sharply for both short and long term horizons.

Consumer sentiment declined by approximately 11% this month, extending a downward trend that began with the onset of the Iran conflict and leaving the index roughly 9% below its level a year earlier. The deterioration was broad-based, affecting all demographic groups across age, income, and political affiliation, as well as all major index components. Expectations for business conditions over the next year fell sharply by about 20%, now standing 6% below last April’s level, while assessments of personal finances weakened by roughly 11%, driven by heightened concerns about elevated prices and declining asset values. Purchasing conditions for durable goods and vehicles also deteriorated, primarily due to persistent price pressures. Open-ended responses indicate that many consumers attribute recent economic weakness to disruptions associated with the Iran conflict. Notably, 98% of interviews were completed prior to the April 7 announcement of a temporary cease-fire, suggesting sentiment may improve as supply disruptions ease and gas prices stabilize. Inflation expectations rose significantly, with year-ahead expectations increasing from 3.8% in March to 4.8% this month, the largest monthly gain since April 2025, and remaining above both 2024 levels and the 2.3%–3.0% range observed in the pre-pandemic period. Long-run inflation expectations also edged higher, rising from 3.2% to 3.4%, the highest reading since November 2025, and remaining above both 2019–2020 levels (below 2.8%) and the 2.8%–3.2% range observed throughout 2024.

We expect that consumer sentiment will remain weak near term due to conflict uncertainty and high prices but may stabilize as supply pressures ease and inflation expectations moderate.