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The Five Ways Oil Impacts The Global Economy

The Macro Institute's Weekly Economic Primer

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The Macro Institute
March 16, 2026

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Don’t have time to watch the whole video? Here’s 5 Key Takeaways:

🔹 Oil Prices Have A Huge Impact On Inflation: Despite only making up 6% of the CPI basket, energy’s volatility makes it the main driver of trends in the index. This makes Headline CPI incredibly sensitive to changes in oil prices. It’s this relationship that ultimately leads to oil’s huge impact on the global economy.

🔹 Oil Prices Impact Central Bank Decisions: Through its impact on inflation, a rise in oil prices typically coincides with the increased tightening of policy from central banks around the world. The opposite is true when oil prices are declining.

🔹 Oil Prices Impact Stock Market Performance: When looking back at previous times when oil prices spiked over 100%, a pattern emerges where the S&P 500 falls alongside the price shock. Each of these episodes is unique, so it is difficult to draw definitive conclusions from these periods.

🔹 Oil Prices Impact GDP Growth: In consumption heavy economies, such as the U.S., real GDP growth tends to be lower during years when consumers are forced to spend a larger proportion of their annual consumption on food and energy.

🔹 Oil Prices Impact Sector Outperformance: Increased oil price volatility tends to coincide with increased stock market volatility. Plus, sustained swings in oil prices can have a large impact on which sectors outperform their index.

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The Macro Week Ahead

📆 Last Week’s Data Key Takeaways

🔹 CPI Held Steady While PCE Ticked Higher: February CPI rose +0.3% M/M and +2.4% Y/Y, both in line with forecasts and unchanged from January. Core CPI rose +0.2% M/M and +2.5% Y/Y, which also matched expectations. January PCE rose +0.3% M/M and +2.8% Y/Y, while Core PCE rose +0.4% M/M and +3.1% Y/Y. This was an acceleration from December's +3.0%.

🔹 NFIB Small Business Optimism Slipped: The index fell to 98.8 in February (vs 99.7 forecast), which is still slightly above the 52-year average of 98. The uncertainty index declined three points to 88, while actual sales and earnings improved. Sales hit its highest level since May 2022. Labor quality as a top concern among small businesses dropped to 15%, the lowest since April 2020.

🔹 Michigan Sentiment Fell While Inflation Expectations Held: Preliminary March Michigan Sentiment dropped to 55.0 (vs 56.6 forecast), down from 56.6 in February's final reading. One-year inflation expectations held at 3.4%, with long-run expectations at 3.3%. Sentiment surged among consumers with large stock portfolios, but stagnated or declined for those without equity exposure.

🔹 Existing Home Sales Slid, Starts Surged, Permits Fell: Existing home sales dropped to 3.91M annualized, down -8.4% from December and -4.4% Y/Y. Housing starts surged to 1.487M (vs 1.348M forecast), up +7.2% from December. Building permits fell to 1.376M, down -5.4% from December and -5.8% Y/Y.

🔹 JOLTS Job Openings Firmer Than Expected: January JOLTS came in at 6.7M openings (vs 6.54M forecast), a modest pickup that suggests labor demand hasn't cracked despite the -92K payrolls print in February.

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