Daily Newsletter 8/18/25

In the U.S. this week, the economic data schedule is notably active and includes several key releases and events.

On Tuesday, August 19, building permits and housing starts data will be reported, which are pivotal indicators of the health of the housing market. Treasury auctions for 3-month and 6-month bills are also scheduled, impacting short-term interest rates. Wednesday will feature treasury auctions and the release of the Fed's July meeting minutes, which will be closely scrutinized for insights into future monetary policy. Thursday brings the Philadelphia Fed Manufacturing Index and initial jobless claims data, both important for assessing economic momentum and labor market conditions.

The week culminates with the start of the Jackson Hole Economic Policy Symposium, where Fed Chair Powell is set to speak on Friday, a highly anticipated event for market participants seeking cues on the Fed's policy direction.

Navigating Uncertainty: Our Dynamic Approach to Forecasting the U.S. and Global Economy

Here’s our perspective on the future of the U.S. and global economy. While we acknowledge the ongoing turbulence and the significant shifts redefining the global economic landscape, we recognize that making long-term forecasts during such times can be both difficult and often unproductive. Instead, we prefer to focus on short-term predictions, typically looking ahead no more than a month. At the same time, we continuously review and update our medium- and long-term outlooks to stay aligned with evolving conditions. This approach allows us to remain agile and responsive in an ever-changing environment.

We anticipate a slowdown in the U.S. economy as inflation reduces consumer spending, global economies face headwinds from U.S. tariffs on their exports, and China’s economic growth remains modest. Over time, the majority of these tariffs will be passed on to the final consumer, intensifying the drag on demand. Typically, companies avoid abrupt price increases to prevent shocking their customers, opting instead to gradually absorb higher costs. Despite numerous exemptions, the average effective tariff rate may settle around 15%. While we have previously advocated for more balanced terms of trade, we disagree with the current methods being employed to achieve this. Although some reshoring of production to highly productive domestic facilities is expected, the process will take years to materialize. Ultimately, this dynamic is likely to reduce overall economic efficiency and diminish the purchasing power of American consumers, with small businesses facing greater risks than larger corporations.