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30 Sept 2025 | 3 minutes to read
Revised US data released last week showed the US economy grew at an annualised rate of 3.8% in the second quarter of the year. Although the US consumer seems in relatively good shape – especially middle- and higher-income consumers – trade-related data is almost certainly distorted by tariffs. There are two issues with the data. First, it complicates the US Federal Reserve’s (Fed) job. Last week, Fed Chair Jerome Powell expressed concerns about rising inflation and a weakening labour market. Inflation is some way above the Fed’s target of 2% with its preferred PCE measure, excluding volatile components like food and energy, at 2.9% year-over-year in August. Second, labour reports and inflation data may be delayed by the looming government shutdown on 1 October after the US Senate rejected a funding bill. Historically, US government shutdowns don’t harm the economy but delaying key economic releases will not help the Fed.
The Organisation for Economic Co-operation and Development (OECD) upgraded its 2025 global growth forecast last week but said that it expects sub-trend output looking ahead. The OECD now forecasts 3.2% growth, up from 2.9%, as many economies prove more resilient than expected, but its 2026 forecast stays unchanged at 2.9%. Growth has likely been brought-forward in Q1 due to trade policy uncertainty, with activity expected to slow through the second half of the year as US tariffs continue to crimp activity. For the UK, the OECD forecasts the highest inflation rate in the G7, averaging 3.5% over 2025, before dropping to 2.7% in 2026 – still amongst the highest in the G7, and well above the Bank of England’s 2% target. Although revised up slightly, UK growth this year is expected to hit just 1.4% – and fall next year due to fiscal constraints. To compound the conundrum facing chancellor Reeves ahead of the Autumn Budget, the latest Purchasing Managers’ Index survey data released last week suggested business activity expectations for the year ahead have fallen, with client confidence, cost pressures and geo-political uncertainty challenging businesses. As a forward-looking indicator, the reading may auger badly for Labour, positioning tricky decisions in UK Budget on 26 November.
Nvidia announced last week that it will invest $100bn into OpenAI and supply the developer of ChatGPT with its data centre chips. The tie up gives Nvidia a stake in one of its highest-profile customers, as more computing power and infrastructure are needed to deploy artificial intelligence. Whilst Nvidia’s share price initially jumped over 4% to a new all-time high, the announcement renewed concerns that tech-titans may be propping up AI demand by investing in their own clients - known as ‘circular financing’. For example, Oracle also announced a multi-year $20bn deal to provide Meta with computing power last week; OpenAI’s broader infrastructure, known as Stargate, uses Oracle’s cloud capabilities as well as Nvidia’s chips; and Microsoft has invested in Open AI since 2019.
Argentina’s peso and India’s rupee both tumbled last week versus the US dollar, but for different reasons. Political turmoil in Argentina has unnerved investors where President Milei suffered a landslide legislative election defeat in Buenos Aires. His sister and chief of staff are ensnared in an alleged corruption scandal. The peso has fallen by more than 37% against the dollar in the last twelve months. To prop it up, Argentina’s central bank spent more than $1bn of its reserves defending it within a few days last week. US Treasury Secretary Scott Bessent said that the US will do “whatever it takes” stop the peso’s slide. But rather than handing Milei more cash on his trip to Washington DC, Milei got a pledge to speed up financial assistance already in train.
Meanwhile, the Indian rupee fell to a record low on tariffs and new visa fears. The US has slapped 50% US tariffs on most imported goods from India – among the highest globally – to punish it for buying Russian oil, allegedly indirectly financing Russia’s war against Ukraine. Last week, the US also increased the cost of skilled H1-B visas from around $2,500 to $100,000 each, threatening India’s export of skilled IT workers. Indian workers apply for most of the annual H1-B visas the US issues.
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