Overview:
- U.S. economic growth accelerated in Q3 2026, with real GDP expanding at a 3.4% annualized rate, up from 2.2% in Q2, supported by higher AI investment (led by inventories as well as equipment related to AI), consumer spending, and federal government spending. The expansion occurred despite persistent inflation, slowing job creation, and rising borrowing costs.
- The FOMC unanimously raised its target rate by 25 bps to 3.75%–4.00% in September 2026. At its October 28 meeting, the Committee maintained the 3.75%–4.00% range in a 10–2 vote, with two members favoring an additional 25-bps increase.
- Inflation remained elevated, with headline CPI reaching 3.7% YoY in September 2026, up from 3.4% in August 2026. PPI final demand increased to 6.3% YoY in September 2026 from 5.6% in August 2026, signaling continued cost pressures. The PCE Price Index rose to 3.6% YoY in September 2026, while core PCE stood at 3.1%.
- Labor market momentum softened, with nonfarm payrolls increasing 29K in September 2026 and averaging approximately 51K per month in Q3, down from 81K in Q2. Unemployment remained at 4.2% in September 2026, relatively steady since May 2024.
- Consumer spending remained resilient, with retail sales increasing 0.8% MoM and 6.3% YoY to $745.0B in September 2026. October consumer sentiment declined to 48.0 from 53.6 a year earlier, while consumer loans at commercial banks reached $1.9T in September 2026, including $1.1T in credit card and revolving balances.
- Financial markets reflected higher borrowing costs, with the 10-year Treasury yield rising 85 bps during Q3. The 10-year Treasury yield increased from 4.44% on June 30 to 5.29% on September 30, before easing to 4.94% by October 30, while the S&P 500 gained 10.7% YTD October 2026.
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About Chesapeake Corporate Advisors
Chesapeake Corporate Advisors is a boutique investment banking and corporate advisory firm providing strategic advisory services (value creation) and investment banking services (value realization) to companies with revenues between $10 million and $200 million. For more information, visit www.ccabalt.com or call 410.537.5988.