Corporate profits stand at 13.2 percent of the entire economy right now. That is a level. A large one. And capital spending is running at 14.2 percent of the economy right alongside it, which is exactly the sequence you want to see: firms making money, then committing to grow. On paper, the engine looks well-oiled.

And yet consumer sentiment sits at 55.2. That is a reading more consistent with a worried public than a booming one. Unemployment is 4.1 percent. Real output is running about 3 percent above its long-term trend. So why does the mood not match the math?

That tension is the thing we keep turning over this week. Because understanding it is not just interesting. It shapes every hiring plan, every financing decision, and every allocation call you will make over the next year.

The economy in two frames

Start with what is unambiguously working. Profits at 13-plus percent of the economy are exceptional. Businesses are not running thin. The firms doing well are doing very well, and the capital spending number tells you they believe it continues: you do not commit 14 percent of GDP to new equipment, structures, and technology if you think demand evaporates next quarter.

The output gap, the distance between what the economy is actually producing and what economists estimate it could sustainably produce at full capacity, is 3.15 percent. That is a wide gap on the positive side. The economy is running hot by that measure.

Now the other frame. Inflation measured by the personal consumption price index, the gauge the Federal Reserve officially targets, sits at 3.7 percent year over year on the headline and 3.3 percent on the core. The Fed’s policy rate is 3.75 percent. So the rate is barely above core inflation, which means in inflation-adjusted terms the Fed is barely restrictive at all. The real policy rate, adjusting for actual inflation, is essentially flat at 0.28 percentage points. Historically, a rate that tight relative to inflation tends to put modest brakes on the economy. It has not done the job of cooling prices yet.

Meanwhile the personal consumption price index in July ran at an annualized pace of about 3 percent on the core when measured month to month. That is closer to where the Fed wants to land. The year-over-year number is stickier. Both readings are real, and they tell you the direction of travel on inflation is encouraging even if the level remains a problem.