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Economic Commentary

Weekly Economic Commentary

April 6, 2026 by Jeanette Garretty, Chief Economist

Economist Mohamed El-Erian, former CEO of bond market giant PIMCO, has a useful, intuitive way of thinking about exogenous shocks, i.e. unexpected events with unpredictable timing that occur outside of the normal framework of industries and national economies. He posits that there are three phases: An initial Phase One of, in the case of the Iranian War, higher energy prices and borrowing costs, followed by Phase Two in which the more broadly defined cost-of-living starts to rise and then a Phase Three defined as a “demand shock” (economic growth shock)  created by the sheer inability to obtain certain goods and services, irrespective of the price. As stories of fuel and refined products rationing filter out of India, Vietnam, the Philippines and even Japan, it seems clear that Asia has gone through phases one and two in the blink of an eye and is getting a terrifying look at phase three. The US and Europe are nervously anticipating inflation figures for March that would signal the widespread rising costs of phase two but diverge in the near-term outlook for economic growth, with the US still much less likely to experience a serious economic slowdown due to war-related supply constraints.  The US, in fact, may never quite get to phase three as defined by El-Erian, yet may witness its own economic growth pains as inflation moves above (possibly well-above) 3%. Last week’s ISM Purchasing Managers Index data showed a sharp jump in the  “Prices Paid” index; the index hit the highest level since 2022, What the US consumer response will be to a price environment resembling the not-fondly-remembered days of the pandemic is anyone’s guess at this point. 

Data to Watch 

  • Euro Area S&P Global Purchasing Managers Index (PMI) for March, released Tuesday, April 7 
  • US Personal Consumption Expenditures (PCE) Index, Personal Income and Personal Spending for February, released Thursday, April 9 
  • US Consumer Price Index (CPI) for March, released Friday, April 10 
  • Preliminary Michigan Consumer Sentiment Survey for April, released Friday, April 10 

Suggested Readings 

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