The Indicator from Planet Money

We resolve to watch these 2026 indicators

January 2, 2026

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  • Tariffs were voted by listeners as the Indicator of the Year for 2025, narrowly beating consumer sentiment and the CAPE ratio. 
  • The Federal Reserve's future direction, influenced by the end of Jerome Powell's term and political pressure for lower rates, is Waylon Wong's key economic indicator to watch for 2026. 
  • Electricity rates, driven by high demand from AI data centers and infrastructure needs, are Steven Passaha's predicted affordability indicator to watch in 2026, contrasting with slowing food inflation and dropping rental prices. 

Segments

2025 Indicator Winner Announcement
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(00:00:48)
  • Key Takeaway: Tariffs won the listener vote for the 2025 Indicator of the Year by a margin of five votes.
  • Summary: The listener vote for the 2025 Indicator of the Year concluded with tariffs winning over consumer sentiment and the CAPE ratio. Greg Rosalski successfully argued for tariffs, while Darien Woods presented the case for the CAPE ratio while dressed as Dracula. The result was determined by listener votes.
Federal Funds Rate Prediction
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(00:03:08)
  • Key Takeaway: The Federal Reserve’s benchmark interest rate and the Fed’s decision-making independence under a potential Trump loyalist chair are the key indicators for 2026.
  • Summary: The federal funds rate is currently between 3.5% and 3.75% following three consecutive rate cuts at the end of 2025. Fed Chair Jerome Powell’s term ends in May, and President Trump has publicly stated he will appoint a loyalist who favors lower rates. Tensions are visible on the committee, evidenced by dissenting votes on recent interest rate decisions.
Electricity Rates as Affordability Indicator
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(00:05:11)
  • Key Takeaway: Electricity rates are predicted to climb significantly due to increased power demand from AI data centers and aging infrastructure.
  • Summary: Electricity prices have jumped about 7% compared to general inflation of under 3%, marking a break from two decades of stable rates. The massive power consumption required by AI data centers is driving this increased demand and higher costs. Home heating costs using electricity could jump by about 12% this winter, according to the National Energy Assistance Directors Association.
Consumer Spending Resilience Analysis
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(00:07:21)
  • Key Takeaway: Resilient consumer spending in 2025 is masking underlying distress, driven disproportionately by the top 10% of earners.
  • Summary: The top 10% of consumers, earning $200,000 or more, account for nearly half of all consumer spending, benefiting from asset appreciation in housing and stocks. This masks reduced confidence seen in record-high auto loan delinquencies and credit card debt among lower earners. Consumer spending strength in 2026 hinges on the stock market remaining strong, supporting high-income households benefiting from tax cuts.