September 2026 Market Update

Economic Highlights

United States

• The U.S. economy added a better-than-expected 162,000 new jobs in August, well ahead of the 53,000 estimate. The unemployment rate remained steady at 4.1%, and the June and July reports were revised solidly higher. Restaurants and bars led with 59,000 new jobs, while education rose by 42,000 and manufacturing contributed 16,000. Health care, the primary engine of job growth, saw a gain of just 13,000, compared with the monthly average of 32,000 over the prior 12 months. Average hourly earnings increased 3.1% Y/Y. The broader U6 unemployment rate actually fell last month to 7.7%.
• The U.S. economy grew an upwardly revised 2.2% in Q2, ahead of the 1.5% advanced estimate. The upward revision reflected greater contributions from consumer and government spending as well as investment.
• Consumer prices posted a smaller-than-expected increase in August from a year ago, according to the Federal Reserve’s primary inflation gauge, the PCE Index. The headline PCE Index rose 0.3% M/M in August or 3.4% Y/Y. Core PCE increased 0.2% M/M or 3% Y/Y, below the 3.3% expectation. While the annual increases were less than expected, they came as the Bureau of Economic Analysis changed the way it computes several components of the index. The revisions lowered the core July PCE level by 0.36%. Headline CPI rose 0.4% M/M in August or 3.4% Y/Y, while core CPI rose 0.3% M/M or 2.4% Y/Y. The Fed hiked rates at its September meeting in response to persistent inflation, and an additional one to two rate hikes are expected by year end.
• The manufacturing sector in the U.S. saw continued strong activity in August based on the ISM Manufacturing PMI. While the headline reading fell from 55.6 in July to 54.6 in August, it remained well into expansion territory, supported by strong underlying fundamentals. New orders, production and employment all fell last month but remain well above the 50 level that separates expansion from contraction. The ISM Services PMI strengthened in August on the heels of a surge in new orders, production, prices and inventories. Survey respondents pointed to strong business conditions but cited higher prices and shortages in areas like memory as potential risks on the horizon.

Non-U.S. Developed

• The eurozone flash composite PMI hit a 41-month high of 53.1 in September, up from 52.0 in August. Output rose at the fastest pace since April 2023 amid solid expansions in both the services and manufacturing sectors. The latest rise in output was also broad-based across the different geographies. Germany posted an expansion for the third month running, with the rate of growth the fastest in just under a year. Activity increased in France for the first time in 10 months, while the rest of the eurozone registered a solid but softer rise in output. Accelerating business growth means the flash PMI survey is indicative of GDP rising at a quarterly rate of 0.4%, with order book growth picking up further momentum across both manufacturing and services in September to hint at sustained momentum heading into Q4.
• Japan's economy grew faster than initially estimated in Q2, supported by business spending that was better than initial expectations. Japan’s economy expanded an annualized 1.4% in Q2 compared with the initial estimate of 1.1%. Capital expenditure was revised up, while private consumption and trade were flat in the revision.

Emerging Markets

• The RatingDog China General Services PMI rose to 51.6 ​in September from 51.4 in August, staying above the ​50 mark that separates growth from contraction. New business grew at its quickest rate since June, supported by improving demand, while new export ​orders rose at a faster clip than in August. The employment gauge rose for a fifth straight month, and input costs eased a bit from the prior month. The official non-manufacturing PMI also returned to expansionary territory in September, climbing to 50.2.
• China’s official manufacturing PMI rose to 50.1 in September from 49.8 in August. The modest expansion was driven by accelerated activity in equipment and high-tech-related manufacturing and consumer industries. Essentially, manufacturers have benefited from the AI boom, while domestic demand remains weak.
• Exports have been one of the few drivers of China’s economy this year, but that engine is showing signs of strain as trading partners voice growing concerns over the country’s excess manufacturing capacity and heavy reliance on foreign demand, while domestic consumption lags. China’s top economic and financial policymakers announced targeted fiscal and monetary measures to lower financing costs and boost central bank lending. This comes as the government struggles to keep the economy on track to meet its full-year growth target.

Sector Performance – S&P 500 (as of 9/30/26)

Sector Performance – Russell 2000 (as of 9/30/26)

Sector Performance – MSCI EAFE (as of 9/30/26)

Sector Performance – MSCI EM (as of 9/30/26)

Disclosures

Investment services offered by Enterprise Bank & Trust are not deposits, obligations, or guaranteed by the bank or its affiliates. The information provided represents the opinions of Enterprise Bank & Trust and is not intended to forecast future events or guarantee future results. Past performance does not guarantee future returns. This information is for educational purposes only. Investors should consult with their investment professionals for advice concerning their particular situation.

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