For the week ending December 5, 2025

We are seeing some very welcome progress on the inflation front, with the Fed’s preferred price gauges cooling down and consumer expectations dropping sharply, which is exactly the recipe we need for long-term stability. While the manufacturing sector is still working to find its footing, the service economy continues to drive growth, and the American consumer is showing renewed optimism despite some mixed signals in the labor market.

Inflation and Prices

The data suggests price pressures are finally easing up, with inflation expectations taking a very encouraging dive.

• Core PCE Price Index (YoY): This is the Fed's favorite yardstick, and it came in at 2.8%, slightly better than the 2.9% forecast and down from the previous 2.9%.

• Michigan 1-Year Inflation Expectations: Consumers are feeling much better about future prices, with expectations dropping sharply to 4.1% compared to the 4.5% forecast and previous reading.

• ISM Manufacturing Prices: Prices paid by manufacturers rose slightly to 58.5, which is lower than the 59.5 consensus but still higher than the previous 58.0.

• ISM Non-Manufacturing Prices: Service sector inflation is cooling off significantly, coming in at 65.4 against a forecast of 68.0 and well below the previous 70.0.

• PCE Price Index (MoM): The headline monthly number held steady at 0.3%, matching both the consensus and the previous month's data.

Employment

We are seeing a real tug-of-war in the labor market, with private payrolls taking a hit while jobless claims are dropping.

• ADP Nonfarm Employment Change: This was a shocker, showing a loss of 32,000 jobs versus a forecast for a 5,000 gain and a previous gain of 47,000.

• Initial Jobless Claims: despite the poor ADP number, actual filings for unemployment benefits dropped to 191,000, beating the forecast of 219,000 and the previous 218,000.

• ISM Manufacturing Employment: Factory hiring remains in contraction territory at 44.0, missing the previous mark of 46.0.

• ISM Non-Manufacturing Employment: The service sector is stabilizing, with the employment index rising to 48.9 from the previous 48.2, though still just shy of expansion.

• Continuing Jobless Claims: The number of people staying on unemployment benefits dipped slightly to 1.939 million, coming in under the 1.96 million forecast.

Manufacturing and Services

The economy remains a story of two sectors, where manufacturing is struggling to find its footing while the service sector continues to expand.

• ISM Manufacturing PMI: The factory sector is still contracting, with the index sliding to 48.2, missing the 49.0 expectation and the previous 48.7.

• ISM Non-Manufacturing PMI: The service economy looks healthy, advancing to 52.6, which beat the 52.0 consensus and the previous 52.4.

• S&P Global Composite PMI: Overall output slowed just a fraction to 54.2, missing the 54.8 forecast but staying comfortably in growth mode.

• Industrial Production (YoY): We saw some solid year-over-year growth here at 1.62%, a nice jump from the previous 0.84%.

• Factory Orders (MoM): Orders managed a small gain of 0.2%, which is positive but a clear deceleration from the previous month's strong 1.3% jump.

Consumer Confidence and Spending

The American consumer is feeling surprisingly optimistic even as they tap the brakes slightly on borrowing and spending growth.

• Michigan Consumer Sentiment: Sentiment jumped nicely to 53.3, beating the previous reading of 51.0.

• Michigan Consumer Expectations: Looking ahead, consumers are more hopeful, with the index rising to 55.0 compared to the forecast of 52.0.

• Personal Spending (MoM): Spending growth moderated to 0.3%, matching expectations but slowing down from the previous 0.5% pace.

• Consumer Credit: Borrowing slowed down noticeably, coming in at $9.18 billion versus the expected $11.80 billion and the previous $11.01 billion.