PNC Economics Research

PNC Economics Research indicates that the U.S. economy currently faces a critical nexus of supply-side energy shocks and dwindling fiscal tailwinds. While consumer spending remains surprisingly resilient despite gasoline prices reaching levels unseen since 2022, research highlights that excess household savings buffers have normalized, leaving consumer health increasingly dependent on labor market stability as current tax refund supports wane. Inflationary pressures have proven persistent and broadening, with headline CPI at 3.8% and a sharp 1.4% monthly increase in the PPI, signaling that energy price volatility is successfully bleeding into core and supercore metrics. Although labor markets have outperformed with average monthly job growth of 115,000 in April, the PNC team notes that real purchasing power is being eroded by rising costs, particularly for lower-income households. Consequently, institutional outlooks suggest the Federal Reserve will likely maintain the fed funds rate in the 3.50% to 3.75% range for the remainder of 2026. The shift in Fed policy toward strict inflation management reflects a defensive posture against broader price pressures and the potential for household credit strain as temporary fiscal stimulus expires.