Quarter · Market review
90 days: rate rises meet signs of weaker demand
Over 90 days, greater inflation risks changed the direction of central-bank rates. An opposing force is becoming clearer at the end of the period: slower US jobs growth and weaker regular orders in Germany. These can constrain future sales, but rising energy prices make it difficult to assume that weaker demand will quickly reduce all business costs.
Period covered: 2026-07-09 – 2026-10-06Information as of 17 min read
The US services survey released on 5 October showed slower expansion and stronger cost pressures. Germany’s August orders report, published on 6 October, revealed how much large contracts influenced the headline decline.
Higher market yields improve the terms for a new bond buyer but can reduce the value of existing bonds. Companies remain exposed when old debt has to be replaced with more expensive borrowing.
Quarter
What happened
The starting point: interest rates had already risen on 17 June
This rolling 90-day period begins on 9 July. Before it began, on 17 June, the European Central Bank’s previously announced interest rate increase took effect. The rate on banks’ overnight deposits rose from 2.00% to 2.25%. These are the initial conditions before the period under review, not a new event within it.
Also on 17 June, the Federal Reserve left the federal funds target range at 3.50–3.75%. It made no change on 29 July. Europe also chose a pause on 23 July. For a business with debt, this meant that energy costs would not be offset by automatically and rapidly falling interest rates.
The starting backdrop: the 18 June agreement had not yet restored shipping
On 18 June, the US announced the signing of a memorandum with Iran. For oil buyers, implementation mattered more: whether ships could sail safely, insurance would be available and oil would actually reach them.
More reliable deliveries would have reduced importing industries’ need to hold expensive inventories. Hauliers would have found fuel and route planning easier. But the agreement itself was not a statistical record of restored flows. July and August data later required a more cautious assessment of precisely this assumption.
July: the supply recovery was not sustained
The International Energy Agency’s 10 July review described a partial recovery in June flows and ceasefire violations on 7–8 July. Its 12 August report said Persian Gulf oil exports in July, including routes bypassing the strait, averaged 15 million barrels per day. That was 2.1 million, or about 12%, below June.
This comparison describes two monthly averages, not a one-day shipping halt. It showed that June’s hopes had not been enough to deliver a lasting improvement. US military statements on 5 and 8 September about strikes on Iranian tankers were a reminder that delivery security remained unresolved. A particular price move cannot be attributed solely to these statements.
23 July: trade rules and sanctions added to the planning burden
The European Union’s 21st sanctions package against Russia expanded restrictions on energy, financial services and the shadow fleet. For companies, this matters beyond politics: payment, insurance and cargo transport options change. But an announced restriction is not a measured fall in exports of the same size.
On 23 July, the Office of the US Trade Representative announced tariff measures on imports from 60 economies, including the European Union. The action concerned insufficient bans on importing goods made with forced labour. Tariffs and exemptions depended on the product and its origin. US importers had to check whether ordered goods would become more expensive, while their overseas suppliers faced the risk that higher final prices would weaken demand.
Late July and August: technology suppliers earned revenue while customers invested
Technology suppliers’ revenue grew while their customers spent heavily on equipment and infrastructure. On 29 July, Microsoft reported capital expenditure, including finance leases, of 41 billion US dollars for the quarter ended 30 June. Cash purchases of property and equipment were 35.8 billion dollars. These amounts must not be added together: the first includes finance leases, while the second shows asset purchases paid for in cash during the quarter.
The company generated 55.4 billion dollars in operating cash flow. Subtracting cash purchases of property and equipment left 19.6 billion dollars. This explains why a rapid pace of construction is not automatically a bad signal: what matters is how much cash the business generates and how much more it needs from outside.
On 26 August, chip designer NVIDIA reported revenue of 96.221 billion dollars for the quarter ended 26 July, up 106% year on year. Operating profit grew 124%. Some customer spending had therefore already become real earnings for the supplier. For customers to earn a return on their investments, however, their new services need demand and must cover equipment, electricity and financing costs.
August and September: growth continued, but costs did not disappear
Both the US and euro-area economies grew in the second quarter. The third estimate of US gross domestic product, published on 30 September, showed annualised growth of 2.2%, or 0.6% quarter on quarter. The second US estimate released on 26 August had been lower. Euro-area growth was revised to 0.6% quarter on quarter on 7 September. On the same quarterly comparison basis, growth in the two regions matched.
The initial US estimate for August, released on 4 September, showed 162,000 additional jobs, but the gain was revised to 133,000 on 2 October. On 9 September, second-quarter revenue growth in selected US service industries was revised to 3.0% from the previous quarter. This revenue measure has not been adjusted for prices. Rising sales and a greater real volume of services delivered are therefore not the same thing.
9–11 September: a higher energy-price forecast was followed by an ECB rate increase
On 9 September, the US Energy Information Administration raised its second-half average Brent price forecast to about 90 dollars per barrel. Model inputs were finalised on 3 September. This is a conditional average for a future period, not the oil price in a particular September session and not an already measured effect of later military action.
On 10 September, the European Central Bank announced another interest rate increase of 0.25 percentage points. The deposit facility rate rose from 2.25% to 2.50% on 16 September. On 11 September, the US Consumer Price Index showed annual inflation of 3.4% in August, the same as in July. The seasonally adjusted monthly change accelerated from 0.1% to 0.4%. These data were known before the Federal Reserve meeting of 15–16 September, which subsequently raised the target range.
? How should we read GDP and price indices?
Gross domestic product measures the value of final goods and services produced in an economy. Real growth removes the effect of prices. US quarterly growth is often reported at an annualised rate, as if the same change continued for four quarters. The Consumer Price Index measures a basket of prices weighted by consumption. Its annual and monthly changes have different comparison bases. The Personal Consumption Expenditures Price Index also includes spending made on consumers’ behalf, uses different weights and accounts for changes in the composition of consumption; these two price indices should not be treated as interchangeable.
Mid-September: June’s hopes were not enough to restore supply
The International Energy Agency’s 11 September forecast projected a larger fall in oil supply than in demand this year. This is a forecast, not the final annual result.
Lower demand does not automatically mean cheaper oil. If the volume reaching buyers falls faster, fuel bills can remain high even as the economy slows. This can help an energy producer only if it can deliver its output. For a haulier or an energy-buying factory, the same situation raises costs.
16–24 September: US bond yields rose again after a brief decline
On 16 September the Federal Reserve raised its target range to 3.75–4.00%. An earlier European decision lifting the deposit rate to 2.50% took effect on the same day. The US ten-year yield fell to 4.96% on 21–22 September, but reached 5.18% on 24 September. The fall in US bond yields was therefore short-lived.
The preliminary S&P Global US PMI Composite Output Index, covering manufacturing and services activity, reached 58.4 in the release of 23 September, compared with 56.0 in August. Seasonally adjusted initial unemployment benefit claims of 197,000 for the week ending 19 September, released on 24 September, at that time added to the evidence that the economy was not weakening sharply. On 1 October, that week’s claims were revised to 198,000; the newer week ending 26 September recorded 197,000. Claims are not a count of jobs created or a final measure of an entire quarter’s growth.
? Purchasing Managers’ Index: what does the threshold mean?
The company survey compares activity with the previous month. Above 50 generally indicates expansion and below 50 contraction. A reading of 58.4 does not mean growth of 58.4%; the preliminary measure may be revised.
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25–28 September: uneven demand and trade relief not yet in force
US August durable-goods orders, reported on 25 September, reached $338.6 billion and were virtually unchanged from revised July. Orders for non-defence capital goods excluding aircraft nevertheless rose 1.6%, while shipments increased 0.6%. These are monthly changes adjusted for seasonality, but not for prices. On the same day, the University of Michigan’s final September consumer sentiment index stood at 48.1, compared with 51.7 in August. Business-equipment demand and households’ assessments were therefore sending different signals.
On 27 September, the White House published US and Chinese lists covering about $30 billion of imports in each direction, proposed for lower tariffs. The US list of imports from China includes plastic tableware and bedding; China’s list of imports from the US includes beef and dairy products. This publication did not bring tariff reductions into force. On 28 September, China reported that August profit at larger industrial enterprises was 4.2% higher than a year earlier; July’s growth was 11.2%. These are year-on-year comparisons; they do not show whether profit rose or fell from July to August. Companies’ profits would depend not only on lower tariffs, but also on selling more goods at profitable prices.
30 September: spending remained resilient while energy prices rose
Figures released by the US Bureau of Economic Analysis on 30 September showed real consumer spending rising 0.6% month on month in August, while real disposable income was unchanged. The Personal Consumption Expenditures Price Index, or PCE, was 3.4% higher year on year; excluding food and energy, the increase was 3.0%. July’s annual readings were identical in the same revised data series.
Germany’s preliminary national September inflation rate rose from 2.9% to 3.3%, with energy inflation increasing from 10.5% to 14.9%, while the rate excluding food and energy remained at 2.4%. France’s measure under the common European methodology rose from 2.6% to 3.4%. On the same day, China’s manufacturing Purchasing Managers’ Index rose from 49.8 to 50.1, but its new-orders index fell from 50.6 to 50.5 and the raw-material purchase-price index increased from 56.6 to 60.8. The different indices showed growing activity alongside uneven cost increases.
US Energy Information Administration figures released on 30 September put commercial crude stocks at 427.3 million barrels in the week ending 25 September, 2.6% above a year earlier. Petrol inventories were nevertheless 7.4% lower, and distillates, including diesel and heating products, 14.9% lower. A rise in crude stocks therefore did not by itself resolve the question of finished-fuel supply.
30 September: memory-chip maker Micron reported higher revenue
US memory-chip maker Micron reported on 30 September that revenue for its fiscal quarter ended 3 September was $54.229 billion, compared with $11.315 billion a year earlier. This year’s quarter contained 14 weeks against 13 in the previous year, so the periods are not identical in length. The result added to the record of rising technology-supplier revenue. However, the value of the company’s shares depends on more than revenue already earned: it also matters how much future growth investors already expect.
1 October: orders held up while new borrowing cost more
The Institute for Supply Management’s September manufacturing survey, released on 1 October, put its Purchasing Managers’ Index at 54.5. Activity was still expanding, but the prices-paid index increased from 71.1 to 77.9. For a manufacturer, this means an opportunity to sell more without necessarily earning more if higher material costs cannot be passed on to customers.
On the same day, the European Central Bank reported that the euro-area new mortgage rate indicator rose to 3.60% in August, consumer credit rates to 7.92%, while the corporate borrowing cost indicator was almost unchanged at 3.77%. These are averages for new agreements, not changes in payments on existing Lithuanian loans. August statistics do not yet show the effects of the subsequent September rate increase.
Eurostat reported on 1 October that Lithuanian house transaction prices were 14.3% higher year on year in the second quarter, against 4.0% in the euro area. This April–June comparison describes prices, not rental income or net investment returns. A home buyer needs to consider both the purchase price and future mortgage payment, but later euro-area lending rates cannot be presented as the cause of earlier Lithuanian price growth.
2–4 October: US jobs growth slowed while energy risks persisted
On 2 October, the US Bureau of Labor Statistics reported that nonfarm payrolls rose by 29,000 in September, following a revised increase of 133,000 in August. The combined July and August result was revised down by 60,000. The weakness was not confined to the latest month: the earlier path of jobs growth was also lower than previously reported.
The September unemployment rate was 4.2%. Slower jobs growth can limit growth in household income and discretionary spending. These figures do not by themselves establish an economy-wide downturn, however.
? Unemployment rate: what is the denominator?
It is the share of the labour force who are not employed, are actively looking for work and are available to work, rather than a share of the whole population. Unemployment and payroll figures come from different surveys, so their monthly movements need not match.
Also on 2 October, Eurostat’s flash estimate showed euro area annual consumer inflation rising from 3.2% to 3.8% in September. These are prices paid by consumers, not the producer selling prices discussed below. On 4 October, seven countries in the OPEC+ group of oil producers retained September production targets for November; these are agreed volumes, not confirmed actual oil supply.
US shares rose alongside bond yields
On 5 October, the Nasdaq Composite index of US-listed shares rose 1.05% from its 2 October close. This is a price change in US dollars, not a euro return. The US Treasury’s 10-year yield increased from 5.28% to 5.31% on the same day.
? Bond yields: what does the change mean?
These are nominal annual US Treasury yield-curve estimates based on indicative market prices, not returns earned over a day. A rise from 5.28% to 5.31% is 0.03 percentage points, or 3 basis points; it does not change a bond’s fixed payments.
US services growth slows while cost pressures intensify
On Monday, 5 October, the US Institute for Supply Management released its September Services Purchasing Managers’ Index (ISM Services PMI). It fell from 55.4 to 54.9 points but remained above the expansion threshold. Meanwhile, the prices index rose from 72.6 to 74.0 points. Business activity was therefore growing more slowly while cost pressures were intensifying.
? Services and prices indexes: what do they measure?
The survey compares business conditions with the previous month. The services index gives equal weight to activity, new orders, employment and supplier deliveries; a reading above 50 points indicates expansion overall. The separate prices index measures how widespread price increases are, so 74 points does not mean 74% inflation.
German orders fell 10.6%, but that is not the pace of decline across all industry
On 6 October, Germany’s statistical office Destatis reported that manufacturing orders had fallen 10.6% in August compared with July. Excluding large orders, however, the decline was just 0.1%. That difference changes the interpretation: the double-digit headline fall does not mean that every factory lost a similar share of its future work.
Most of the decline came from the category covering ships, aircraft, trains and military vehicles. July had brought an exceptionally high volume of large contracts in this category. Such orders arrive unevenly, while production and payments can take much longer. One weak month for orders is therefore not the same as an equivalent loss of revenue already earned.
Even so, the weakness is not just statistical noise. In June–August, orders excluding large contracts were 2.6% below the previous three months. A weaker flow of regular orders makes it harder for industrial component and equipment manufacturers to keep their factories busy in the future.
? Manufacturing orders: what does this measure show?
The measure tracks new orders received by manufacturers after removing the effect of price changes. The monthly comparison is seasonally and calendar adjusted; August figures are provisional. An order is not a product already made or revenue received, while the measure excluding large contracts helps reveal the steadier flow of business.
Energy prices are rising much faster than other producer prices in Europe
On 5 October, Eurostat reported that euro area industrial producer prices had risen 1.9% month on month in August. Energy prices rose 5.6%, while total industry excluding energy recorded just 0.2%. This is not an equally sharp increase everywhere: businesses buying energy face the greatest pressure.
Profits at chemical, metal and other energy-intensive manufacturers may fall if higher electricity or fuel costs cannot be offset by higher selling prices. Energy suppliers may gain revenue from higher prices, but their profits also depend on their own costs and the volume sold.
On the same day, European Central Bank Executive Board member Philip Lane explained the other side of this pressure: expensive energy leaves households with less money for other purchases, while higher long-term interest rates restrain consumption and investment. Inflation risks can therefore rise even as demand weakens. This was his assessment, not a new interest-rate decision.
? Industrial producer prices: what does this measure show?
The Industrial Producer Price Index measures manufacturers’ selling prices in the domestic market, not their entire cost basket or consumer inflation. The comparison is between August and July; the energy category’s 5.6% is not its percentage-point contribution to the overall measure.
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Quarter
What matters now
Why do rising shares not yet ease borrowers’ problems?
Interest rates are not the only influence on shares: improving profit expectations can offset more expensive borrowing. But higher refinancing costs can reduce profits for heavily indebted property companies. Bonds present a different distinction: a new buyer receives a higher yield, while the market prices of existing fixed-payment bonds generally fall. Longer-dated bond funds usually respond more strongly. One Monday of rising shares does not remove this risk.
Retailers and leisure companies still have opportunities to increase sales, but higher operating costs can reduce profits. For logistics businesses, the question is whether these costs can be passed on to customers. If not, profit margins narrow. Nevertheless, the survey does not yet point to a broad decline in demand: expansion continues, albeit at a slower pace.
In Europe, sales volumes matter as well as higher prices
Transport-equipment manufacturers with large contracts may have better prospects than the headline figure suggests. A wider range of industrial suppliers still faces the risk of weaker demand, limiting revenue and profit.
Consumer businesses need to watch whether customers cut discretionary purchases. Weaker demand could support bonds if it reduces future inflation, but prolonged energy price increases would work in the opposite direction.
The dollar strengthened slightly against the euro
The ECB reference rate was 1.1204 US dollars per euro on 5 October, compared with 1.1225 on 2 October. Other things equal, a stronger dollar increases the euro value of unhedged dollar assets, but also makes imports paid for in dollars more expensive. The investment’s final return also depends on the asset price. This is Monday’s reference rate, not a live Tuesday transaction price.
Quarter
What comes next
On 6 October, Eurostat’s August retail trade release is scheduled for after this review’s data cutoff. It will show whether the volume of goods purchased by households increased despite higher energy prices.
On 7 October, Destatis will publish German production data for August. Did factory output also fall, or did work on earlier orders sustain production volumes?
On 7 October, the Federal Reserve will release the minutes of its 15–16 September meeting. They will explain how policymakers assessed inflation and growth risks at that time, but will not yet reflect their response to data released in October.
On 8 October, the ECB is scheduled to publish the account of its 9–10 September monetary policy meeting. How were energy inflation risks and economic resilience assessed at the time? This will explain an earlier decision, not set interest rates anew.
On 8 October, Federal Reserve Governor Christopher Waller is due to speak about the economic outlook. His assessment of slower growth alongside continuing price increases will be particularly relevant.
Important. This is general market analysis, not a personal recommendation to buy or sell. Historical data and company results do not guarantee future returns. Forecasts and conditional scenarios may not materialise.
How is the history preserved and updated?
All five periods in this edition share one information date. Week means the latest 7 days, quarter means 90 days, and year means the trailing 12 months. The next dated edition will have a separate URL. This text keeps its date and assessment; later events are not silently inserted into an older edition. Longer periods assess new evidence alongside earlier developments without repeating every headline.
