Treasury Secretary Scott Bessent expressed strong optimism for the U.S. economy in 2026, citing President Trump’s trade deals, tariff agenda, and the recently passed domestic policy package as key drivers. He acknowledged some economic pressures, particularly in the housing sector and the impact of the government shutdown. Bessent also discussed healthcare cost reductions anticipated under the Trump administration. In addition, Bessent advocated for ending the Senate filibuster and voiced support for a U.S.-backed peace deal between Russia and Ukraine.
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The International Monetary Fund (IMF) projects global government debt to reach 100% of GDP by 2029, the highest since World War II, fueled by increased spending before and during the Covid-19 pandemic. The IMF’s Fiscal Monitor report highlighted that this increase is causing significant concern, especially for emerging economies, urging governments to shift spending towards growth-friendly sectors like infrastructure and education. The UK, among other G20 nations, is expected to see its debt-to-GDP ratio surpass 100%, and faces scrutiny from bond market investors. The IMF also cited reluctance to impose tax increases and looming expenditures on defense, natural disasters, and demographics as contributing factors to rising debt.
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July’s inflation, as measured by the Federal Reserve’s preferred personal consumption expenditures (PCE) price index, edged higher, with core inflation reaching a 2.9% annual rate, the highest since February. The all-items index also hit the consensus outlook at a 2.6% annual rate. While the Fed targets a 2% inflation rate, markets still anticipate the Fed to resume lowering its benchmark interest rate, with experts like Ellen Zentner emphasizing the importance of labor market data. Despite rising prices, consumer spending increased 0.5%, alongside a 0.4% rise in personal income, indicating economic strength.
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The Producer Price Index (PPI) unexpectedly surged in July, signaling persistent inflationary pressures in the U.S. economy. Excluding food and energy, core PPI rose sharply, with services inflation making a notable contribution. The overall PPI increased by 3.3% year-over-year, exceeding the Federal Reserve’s inflation target, leading to market adjustments. Despite this, the likelihood of a September rate cut by the Fed remained, though slightly diminished by the PPI figures.
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The Atlanta Fed’s GDPNow tracker projects a concerning 1.5% decline in GDP for Q1 2025, revised down from a previously projected 2.3% growth. This downward revision stems from weaker-than-expected consumer spending in January and significantly decreased net exports. Further contributing to the negative outlook are decreased consumer confidence, rising inflation concerns, and an increase in unemployment claims. These factors, coupled with an inverted yield curve, suggest a potential recession.
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Jobless claims rose to a three-month high of 242,000 last week, exceeding analysts’ predictions but remaining within the healthy range observed over the past three years. The four-week average also increased, reflecting a slight uptick in layoffs. This increase, however, is anticipated by some economists to be a gradual rise rather than a sudden surge, potentially linked to upcoming government-mandated workforce reductions. Despite this, the broader labor market remains robust, with low unemployment and continued job growth, though at a slower pace than in recent months.
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As I look at the current state of affairs and the impending presidential election, the words of Donald Trump in 2004 echo in my mind: “And it just seems that the economy does better under the Democrats than the Republicans.” History has shown time and time again that Republican administrations have not fared well with the economy, and the prospect of a potential Trump win leading to an economic downturn does not come as a shock.
Looking back on the recessions that have plagued us since the 1950s, it’s glaringly obvious that the Democrats have only one recession to their name, while the Republicans have a whopping ten.… Continue reading
John Q. Hosedrinker