Economic Outlook - March 2026
- The January Institute for Supply Management (ISM) Manufacturing Report unexpectedly rose to 52.6%, up from December’s 47.9%. This reading was a considerable improvement, and the sector’s first expansion in 12 months, driven by new orders, production, employment, and prices. The ISM Services Report for January was unchanged from December’s reading, indicating continued expansion in the services economy. Manufacturing showed a strong start to the year, but pricing pressures bear watching as some survey participants cited ongoing demand challenges. The ISM is one of the most critically monitored monthly economic indicators for the U.S. economy, as it provides an early snapshot of economic health before other major data like Gross Domestic Product (GDP) or industrial production are released.
- The price of gold hit an all-time high in late January, reaching $5,589 an ounce for the first time in history. Driven by strong central bank buying, geopolitical tensions, and inflation fears, gold prices through February stabilized above $5,260. Past rallies in the price of gold have occurred during volatile times such as the 2020 pandemic and the Great Financial Crisis of 2007 – 2009. While the cryptocurrency Bitcoin and gold have moved in correlation in years past, that relationship has broken down considerably over the past year as gold’s traditional safe-haven appeal remains stronger during times of economic volatility. On a year-to-date basis, Bitcoin has declined ~25% in value compared to gold’s gain of ~21%.
- Artificial intelligence (AI)’s potential effect on software companies drove a sell-off in the technology sector throughout February as major investor concern left many questioning whether these software companies can withstand competition from AI-powered rivals. While AI agents are increasingly capable of enhancing efficiency and automation for software engineering through large language models, we continue to believe we are in the early stages of experimentation and adoption. Although much will need to be played out, the combination of AI and human interaction in software development is likely to shift from simple automation and analysis to strategic planning, design, and creative problem-solving.
- The latest inflation data confirmed that inflation was firmer in January as the Producer Price Index (PPI) climbed 0.5% from December 2025 to 2.9%. Excluding food and energy, Core PPI increased 0.8% to 3.6%, the most in more than three and a half years, as businesses passed on import tariffs and raised prices at the start of 2026. The stronger-than-expected increases in these key inflation metrics indicate core inflation continues to be persistent. It also reinforces economists’ expectations that the Federal Reserve may not resume cutting interest rates before its June 2026 meeting as it works to determine how federal policy changes might affect economic conditions.
Sources: FactSet, Dow Jones Publishing, Bloomberg, Bureau of Labor Statistics, U.S. Federal Reserve, Yardeni Research
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