3/13/2026 Weekly Update: US February Inflation Showed Signs of Slowing Before the Conflict Began
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Domestic Economic News
We would like to thank the brave men and women in our US armed forces for their sacrifice and their service to our country. We address the impacts of the current conflict in the International segment below. As we celebrate our 30th year in business here at SGK we want to assure our clients that as always when faced with turbulent times we are steady at the helm for you.
On the US economic front, underlying US inflation slowed in February from a month earlier, offering some relief from price pressures before the war with Iran. The consumer price index, excluding food and energy, rose 0.2% from January, according to the Bureau of Labor Statistics data out Wednesday. From a year ago, it was unchanged at 2.5% — the slowest pace in nearly five years. The report showed lower prices for used cars and motor vehicle insurance helped keep inflation in check last month, despite higher costs for gasoline and groceries including fresh vegetables and coffee. Inflation has generally been on a downward trend in recent months after proving stubborn for much of last year. But renewed inflation concerns from the war with Iran, which has boosted oil, gasoline and fertilizer costs, risks amplifying affordability worries among Americans ahead of this year’s midterm elections. Federal Reserve officials are expected to leave interest rates unchanged at their policy meeting next week, a prediction that preceded the latest events in the Middle East. With the war threatening to push up inflation — at least in the near term — some investors now see a chance the central bank will remain on hold for longer. However, officials also need to be mindful of lingering fragility in the labor market.
The pullback in underlying inflation also reflected tamer housing costs — one of the biggest components of the CPI. A key metric known as rent of primary residence rose 0.1%, the least in five years. Goods prices, excluding food and energy, barely increased. But the report suggested that for some merchandise, like apparel and appliances, companies may have sought to pass along tariff-related costs to consumers. Key household items like groceries, gasoline and piped gas were more expensive in the month. Prices for fresh vegetables, including lettuce and tomatoes, rose by the most since 2017, while coffee costs also picked up. Egg and butter prices continued to fall. Even though gas prices were already on the rise before the war started, they’ve skyrocketed since then as the conflict has disrupted global oil supplies. Prices at the pump have climbed from $2.98 a gallon before the strikes on Iran to $3.58, according to the latest figures from AAA. “Prices will rise sharply starting in the next report,” Carl Weinberg, chief economist at High Frequency Economics, said in a note. He noted how higher energy prices will not only boost airfares and trucking costs, but will also trickle down to food and other goods. Including food and energy costs, the overall CPI advanced 0.3% from January and 2.4% from the prior year.
Sales of previously owned US homes unexpectedly rose in February and the prior month was revised up, helped by a decline in mortgage rates and modest growth in asking prices. Contract closings increased 1.7% to a 4.09 million annualized rate, according to National Association of Realtors data released Tuesday. The pace exceeded nearly all estimates in a Bloomberg survey of economists. One emerging bright spot for the housing market is improving affordability, with mortgage rates receding recently along with price growth. The NAR’s monthly housing affordability gauge, which reflects changes in home prices, median income and borrowing costs, stands at the most-favorable reading since 2022. “Housing affordability is improving, and consumers are responding,” NAR Chief Economist Lawrence Yun said in a statement. “Still, there is a long way to go to return to pre-pandemic levels of transaction activity.” The NAR report showed the median selling price rose 0.3% from a year earlier — one of the smallest advances since the pandemic housing frenzy — to $398,000 last month. The inventory of previously owned homes increased 4.9% from a year ago to 1.29 million — the most for any February since 2020.
Initial jobless claims remained low into early March, showing little sign of deterioration in their first reading since the Iran war began. Still, broader labor-market indicators — including unexpected losses in the February jobs report and lower job-creation plans among small-business owners — suggest potential upside risk to the unemployment rate. Initial jobless claims declined by 1,000 to 213,000 in the week through March 7, below the consensus expectation of 215,000. Continuing claims declined by 21,000 to 1,850,000 for the week ending Feb. 28. The level is very similar to 1,851,000 in the comparable week of 2025.
US consumer spending barely rose in January after economic growth was weaker than previously reported at the end of last year. Inflation-adjusted consumer spending increased 0.1% from the prior month, according to Bureau of Economic Analysis data out Friday. The so-called core personal consumption expenditures price index, which excludes food and energy items and is favored by the Federal Reserve, rose a firm 0.4% month-over-month and 3.1% year-over-year. The headline number came in at 0.3% month-over-month while the annual figure was 2.8%. These figures were all in-line with expectations. Another report from the BEA showed the US economy expanded at a 0.7% annualized rate in the fourth quarter — when the government experienced a record-long shutdown — compared to an initial estimate of 1.4%. Consumer, business and government spending, as well as exports were marked down, but a gauge of underlying demand was relatively solid. The economy is in a different place now, as the war in Iran has boosted energy prices and may take a toll on household sentiment. Tax refunds, as well as firm wage growth, should lend some support to consumers’ finances in the months ahead. Still, economists see a risk to spending going forward given the threat of greater inflation from the conflict and a fragile job market. While Fed officials are widely expected to leave interest rates unchanged at their policy meeting next week, a sustained pickup in inflationary pressures could delay a resumption of rate cuts at a time when President Donald Trump continues to demand them.
Interest Rate Insight and the Fed
US mortgage rates increased last week by the most since September, a setback for a housing market that had been enjoying easing financing costs this year. The contract rate on a 30-year mortgage rose 10 basis points to 6.19% in the week ended March 6, according to Mortgage Bankers Association data released Wednesday. That followed back-to-back weeks of the lowest rates since 2022. The increase in borrowing costs coincides with a sharp rise in the 10-year US Treasury yield, which is correlated with mortgage rates, as war with Iran disrupted oil flows and sparked concerns about inflation. Weeks of lower rates alongside fears of a further rise in home-financing costs may have encouraged some prospective buyers to step off the sidelines last week. The MBA’s measure of applications for home purchases rose 7.8%, the most since early January. An index of refinancing activity edged higher and has increased in all but two weeks this year, based on MBA data. The market was showing nascent signs of some momentum as affordability constraints began to ease. Figures out Tuesday showed contract closings on previously owned homes climbed in February. However, any sustained upswing in home-finance costs risks restraining demand entering the crucial spring-selling season. The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.
Impactful International News
In general this week, stocks fell as oil prices kept rising, with Iran stepping up attacks on neighboring states and causing widening disruptions to crude shipments. A gauge of global bonds erased its 2026 advance as well as interest rates rose globally on concerns the rising price of oil would stoke inflation. Brent briefly jumped back above $100 a barrel in Wednesday trading as Iraq suspended oil terminal activity following an attack on two tankers. Oman temporarily evacuated a key export hub, while Iran launched strikes on targets in Dubai and Kuwait. The dollar remained the haven of choice, rising 0.2% that day and the trend for the US dollar has been higher since the outbreak of hostilities. The war in the Middle East is creating the biggest-ever disruption in oil markets, affecting 7.5% of global supply and an even greater portion of exports, the International Energy Agency said. The surge in oil prices reflects concern that the conflict could throw energy markets into turmoil for a prolonged period, with efforts to cushion the impact offering little relief. Crude is driving moves across asset classes as traders fear that higher fuel costs will rekindle inflation and hit economic growth. A Bloomberg index that tracks total returns from investment-grade government and corporate bonds is now flat for 2026. The gauge had been up as much as 2.1% this year through Feb. 27, just before the US and Israel attacked Iran. Any sustained pickup in price pressures will make it harder for the Federal Reserve to justify resuming interest-rate cuts in coming months, with money markets seeing only one reduction for 2026.
European countries including France have opened talks with Iran seeking to negotiate a deal to guarantee safe passage for their ships through the Strait of Hormuz, according to a Financial Times report. Italy had also made attempts to open discussions with Tehran on the issue. European capitals have opened the tentative discussions in an attempt to restart oil and gas exports without expanding the conflict. According to the report, there was no guarantee that the talks would progress or that Iran was willing to negotiate on the issue, two of the officials told the Financial Times. An Élysée spokesperson referred the FT to a social media post by Macron last week, which stated that he had spoken to Iran’s President and stressed to him that Tehran “needs to guarantee freedom of navigation to put an end to the closure of the Strait of Hormuz.” Europe in particular is highly dependent on imports of both oil and natural gas.
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