AUG · ISSUE 35 · August 27, 2026
MACRO · VICEThe consumer slows and the Fed can't ease
Confidence near 1978 lows, sticky inflation, and a central bank still talking about hiking.
MICHIGAN CONFIDENCE
1978 low
worse than 2008 or COVID
CONFERENCE BOARD
89.4
7-month low
NEW HOME SALES
-10.5%
sales falling
THE DATA
1978
↓ consumer confidence at its lowest since that year
University of Michigan confidence is near its lowest levels since 1978, worse even than the 2008 crisis or COVID. The Conference Board falls to 89.4, a 7-month low. And new home sales are down 10.5%.
DATA
ZOOM IN1978
1978
▼ confidence at a near-50-year low
When the average household stops believing in the future, it stops spending. And spending is two-thirds of the economy.
To find a consumer this gloomy you have to go back nearly five decades. Neither 2008 nor COVID printed a reading this low.
- CONSUMPTION
- — Household spending. Roughly two-thirds of US GDP.
- GDP
- — The total size of a country's economy.
QUOTE
THE VICEThe worst spot for a central bank
“When the economy cools but prices won't fall, every central bank move hurts someone.”
If the Fed cuts rates to help the consumer, it stokes inflation. If it hikes to fight inflation, it chokes the consumer. No comfortable lever.
- STAGFLATION
- — A stalled economy and high inflation at once. The Fed's nightmare.
- RATES
- — The price of money set by the central bank.
TREND
8 MONTHSConfidence that won't stop falling
A line that falls eight months straight isn't noise: it's a consumer fading a little at a time.
A consumer confidence index sliding month after month. The sustained decline, not one bad print, is what worries the market.
- TREND
- — The underlying direction of a data series, beyond any single print.
- LOW
- — The lowest value reached over a given period.
BOTH SIDES
DATA vs FEDWhat the data asks, what the Fed does
THE CONSUMER
Asking for relief
- Confidence near its lowest since 1978, worse than 2008.
- New home sales down 10.5%.
- Signs of fatigue in the spending that holds up the economy.
THE FED
Still watching inflation
- PCE stays sticky, near 3.3% against the 2% target.
- An official openly talks about RAISING rates, not cutting.
- The 30-year bond above 5% makes all financing more expensive.
The real economy is asking for help while the Fed keeps its eye on inflation. That gap is what stresses the market.
- PCE
- — The Fed's preferred inflation gauge.
- 30Y
- — The US 30-year Treasury bond. The benchmark for long-term financing costs.
THE WALLET
HOUSEHOLD SPENDWhy the average household is squeezed
When housing and debt eat the budget, savings and leisure fall first. And that slows the economy.
This is an illustrative split, not your budget. It shows why, with housing and debt rising, there's little room left for everything else.
- COST OF LIVING
- — What it costs to cover a household's basic needs.
- SAVINGS
- — The share of income not spent. The first casualty when inflation bites.
CALENDAR
WHAT CONFIRMS THE VICEThe data that tells us if the vice tightens
| WED AUG 26 · 08:30 ET | CORE PCE | High | If it runs hot, the Fed stays tough and the consumer gets no relief. |
| WED AUG 26 · 08:30 ET | GDP Q2 (2ND EST.) | Medium | Confirms or corrects how much the economy is cooling. |
| THU AUG 27 · 08:30 ET | JOBLESS CLAIMS | Medium | A jump in claims would be another crack in spending. |
| TUE SEP 01 · 10:00 ET | ISM MANUFACTURING | Medium | The pulse of the real economy behind the surveys. |
| FRI SEP 04 · 08:30 ET | PAYROLLS (NFP) | High | The print that decides whether the Fed can afford to cut. |
Each of these prints tips the scale: toward a weaker consumer or a tougher Fed. The market reads them minute by minute.
- PCE
- — The Fed's preferred inflation gauge. Sets the path for rates.
- NFP
- — US non-farm payrolls. Moves rates and stocks on the first Friday of the month.
- ISM
- — Manufacturing activity index. A leading read on the economy.
WRAP
FOLLOW USDo you get the vice now?
Weak consumer and high inflation at once: the scenario no central bank can solve without pain.
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- STAGFLATION
- — A stalled economy and high inflation at once.
- CONFIDENCE
- — A survey of household optimism about the economy.