Weekly Market Commentary December 1, 2025
WEEK IN REVIEW
Markets had a shortened trading week due to the Thanksgiving holiday, but several key economic reports provided insight into inflation trends, consumer behavior, and business activity.
Inflation Signals Remain Mixed
September’s Producer Price Index (PPI) rose 0.3% month-over-month, in line with expectations but higher than August’s -0.1% decline. The increase was largely driven by gasoline prices, which surged 11.8% and accounted for roughly 60% of the rise in final-demand goods. While higher energy costs can pressure corporate margins, the report suggests that structural inflationary pressures remain limited. The Beige Book echoed this view, noting moderate price increases and tariff-related cost pressures, but with mixed ability for firms to pass costs to consumers. Businesses expect cost pressures to persist, though near-term pricing plans remain uncertain.
Consumer Spending and Confidence Show Signs of Strain
Retail sales for September disappointed, with headline growth at 0.2% versus expectations of 0.4%, and well below August’s 0.6%. Core retail sales met forecasts at 0.3% but also softened from prior levels. Adding to the cautious tone, the Conference Board’s Consumer Confidence Index saw a significant decline in November, dropping from 95.5 to 88.7. Additionally, the Expectations Index fell to 63.2, marking the tenth straight month below the recession warning level of 80. All components of the index deteriorated, signaling heightened concerns about income, business conditions, and the labor market.
Housing and Business Investment Offer Bright Spots
Despite weaker sentiment, housing activity surprised to the upside. Pending home sales rose 1.9%, well above the 0.5% forecast, as buyers appear to be taking advantage of lower mortgage rates and stable home prices. The House Price Index confirmed that prices were flat in September. Meanwhile, durable goods orders provided a positive signal for manufacturing, with core orders rising 0.6%, slightly above August’s 0.5%, suggesting continued investment in long-lasting goods.
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