The latest biweekly reading of the Penta-CivicScience Economic Sentiment Index (ESI) increased 1.2 points to 29.0, its first increase after four consecutive declines. The increase came despite accelerating inflation, mortgage rates reaching a three-year high, and renewed volatility in energy markets.
—Confidence in the overall U.S. economy increased 1.5 points to 29.5.
—Confidence in finding a new job increased 1.2 points to 25.6.
—Confidence in making a major purchase increased 0.6 points to 19.8.
—Confidence in buying a new home decreased 1.2 points to 19.7.
Inflation accelerated in September, exceeding economists’ expectations, as rising energy costs contributed to increased price pressures. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose 0.6 percent during the month and 3.7 percent year-over-year, up from 3.4 percent in August. Gasoline accounted for over half of the monthly increase. Renewed attacks on shipping in the Strait of Hormuz pushed Brent crude to $109.86 per barrel on October 16, adding further upward pressure to the energy prices. At the same time, core CPI, which excludes volatile food and energy prices, also rose to 2.6 percent year-over-year from last month's 2.4 percent, indicating that price pressures extended beyond energy. Mark Zandi, chief economist at Moody's, said the report showed inflation is "uncomfortably strong."
Minutes from the Federal Open Market Committee’s (FOMC) September meeting, released on October 7, showed that 16 of 18 officials expected another interest rate increase before the end of the year as inflation remained elevated. However, the Fed’s latest Beige Book report painted a mixed picture of economic conditions across the country. Most Federal Reserve districts reported little or no change in consumer spending and employment, while three reported robust price growth. These findings underscore the challenge facing the Fed as it weighs persistent inflation against signs of slowing economic activity.
Mortgage rates continued to climb during the period, adding to affordability challenges for prospective homebuyers. Freddie Mac reported that the average 30-year fixed mortgage rate rose to 7.4 percent during the week ending October 8, hitting a three-year high. Higher borrowing costs continued to weigh on the housing market, as the National Association of Realtors (NAR) reported that existing-home sales rose just 1.5 percent in September, with August and September marking the two slowest months for sales this year. Meanwhile, the median existing-home price rose 1.3 percent from a year earlier to $417,500, keeping affordability strained even as sales slowed.
The ESI’s three-day moving average peaked early before steadily declining to its low for the period. It began at 27.0 on October 7 before rising sharply the next day to 29.9. It then rose to a high of 32.6 on October 10 before falling to a low of 26.8 on October 20 to close out the session.
The next release of the ESI will be on Wednesday, November 4, 2026.
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