The Weekly Briefing from Capital Economics

The final major week of the year in macro is in the books. Group Chief Economist Neil Shearing joins The Weekly Briefing to explain why the latest US inflation report should be taken with a “bucketful of salt,” while reviewing the year-end moves from the BoE, BoJ, and ECB. He reviews the latest moves from the Bank of England, the Bank of Japan, and the ECB, and talks about why a growing Chinese trade surplus has a corresponding deficit that could present a key risk to global macro stability.Plus, Deputy Chief Markets Economist Jonas Goltermann discusses one of our most prominent calls for 2026: why, despite recent wobbles, the AI-driven equities bubble will continue to inflate.

Neil Shearing, Group Chief Economist at Capital Economics, joins Jennifer McKeown, Chief Global Economist, to explore predictions for 2026. They discuss how AI will primarily boost U.S. GDP, projecting a 2.5% growth fueled by technology investments. The duo highlights potential risks, such as the impact of a possible AI equity bubble burst and fiscal fragility in advanced economies. They also examine tensions in U.S.-China trade relations and the potential policy shifts in Europe, painting a complex picture of the global economic landscape.

Join Andrew Kenningham, Chief Europe Economist, Neil Shearing, Group Chief Economist, and William Jackson, Chief EM Economist, as they dissect Europe’s economic landscape. They discuss the fading optimism in Europe, slow fiscal stimulus, and Germany's cautious approach to debt. The trio explores Europe's competitiveness against the US and China, highlighting weak innovation and protectionist measures. With concerns over fiscal risks in Italy and France, they ponder Europe's military-industrial challenges amid rising geopolitical tensions.

Paul Dales, Chief UK Economist, shares insights on the UK Budget's mixed reception, discussing the limited growth strategy and the potential role of AI in boosting productivity. Ruth Gregory, Deputy Chief UK Economist, highlights the looming political risks that might impact fiscal credibility and gilt markets. Meanwhile, Leah Fahy, China Economist, tackles the decline in fixed-asset investment, suggesting it's more about successful policy than just economic downturns, backed by alternative activity measures showing resilience in industrial performance.

Ruth Gregory, Deputy Chief UK Economist, dissects the turbulent lead-up to the UK's autumn Budget and its potential economic impact. Jonas Goltermann, Deputy Chief Markets Economist, raises concerns over the sustainability of the AI-led stock market rally, drawing parallels to past bubbles. Meanwhile, Neil Shearing, Group Chief Economist, discusses the implications of the recent Trump-Mohammed bin Salman meeting and the shifting dynamics in US-Saudi relations amid a fracturing global economy. Expect insights on fiscal policy, market risks, and geopolitical shifts.

Neil Shearing, Group Chief Economist at Capital Economics, discusses the delayed economic reports due to the US government shutdown and the need for coherent fiscal strategies. Vicki Redwood, a Senior economic advisor, analyzes AI's impact on entry-level jobs, explaining the nuances of market trends and the role of other factors like degree inflation. Mark Williams, Chief Asia Economist, touches on India's rare earths sector and how AI presents both challenges and opportunities, particularly in outsourcing and productivity enhancements.

Neil Shearing, Group Chief Economist at Capital Economics, discusses Rachel Reeves' subtle tax hints and their dual audience of MPs and bond markets. He delves into potential fiscal risks from the Supreme Court's tariff decisions, exploring their implications on US revenues. John Higgins, Chief Markets Economist, argues that recent US equity sell-offs are mere corrections within a robust AI-driven rally, emphasizing the sustainability of earnings and market concentration among mega-cap firms as central to future forecasts.

The Fed is trying to calibrate policy in the midst of a government shutdown that’s effectively cut off the flow of data. Jerome Powell says that when you’re driving in fog, you should slow down – but there’s still a case for the FOMC to follow this past week’s rate cut with another move in December, says Deputy Chief North America Economist Stephen Brown. He talks to David Wilder about why the state of the US economy argues for another cut this year, but fewer in 2026 than markets currently expect.That Fed meeting wasn’t the week’s only big event. In Korea, Donald Trump held the first face-to-face meeting of his second term with Xi Jinping. The one-year truce resulting from that meeting has eased near-term US-China trade tensions, but much could still go wrong, warns China Economist Leah Fahy. She discusses what might plunge bilateral relations back into crisis, the health of China’s economy, and why – even if Washington clears Chinese firms to buy cutting-edge AI chips – they may not do so.Analysis and events referenced in this episode:Drop-In: The Fed, ECB and Bank of England – Latest decisions and policy outlookCapital Economics EventsRead: Fed cuts and ends QT, but further loosening not guaranteedRead: Bank of Canada cuts but thinks it has done enoughXi-Trump talks buy China time to decouple at its own paceThe economic and market impact of AI

Out of the darkness of a shuttered US government comes a rare data release – and it’s a CPI report that’s given markets some relief as the week draws to a close. But does September’s inflation data really clear the way for Fed rate cuts in December as well as October, as investors now expect?In this week’s episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing explains why the Fed is likely to stay cautious, previews key upcoming central bank meetings, and looks ahead to next week’s much-anticipated Donald Trump-Xi Jinping summit in South Korea.Also on the show, the US Treasury’s new sanctions on Russia’s two biggest oil exporters have brought a key risk to our below-consensus oil price forecasts to the fore. Chief Climate and Commodities Economist David Oxley discusses how much this move could shake up the outlook – and whether Trump will actually follow through with full enforcement.Analysis and events referenced in this episode:Read: China ramping up use of export controlsDrop-In: Argentina’s mid-term elections – A referendum on Milei’s reformsDrop-In: The Fed, ECB and Bank of England – Latest decisions and policy outlook

In just a few days, US–China relations have taken a troubling turn. How did we go from the goodwill of the London and Madrid bilaterals to the current war of words, the threats and the counter-threats? Is this simply pre-APEC brinkmanship, or the start of a more fundamental breakdown in relations between Washington and Beijing? And how great are the risks of a miscalculation that spills over into the global economy? In this special episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing and Head of China Economics Julian Evans-Pritchard discuss the past, present and future of US–China relations. They explore key questions, including:• What’s driving Beijing’s new controls on rare earths, and whether the government could reverse course• What’s wrong with US perceptions of China’s economic health – and why those perceptions could prove dangerous • How the global economy will need to keep adjusting to a fracturing US-China relationshipAnalysis referenced in this episodeThe fracturing of the Global EconomyUS may revive plans to curb financial ties with ChinaGlobal Economics Outlook: US leads, others lag, in uneven global economyCAP: Economy holding up, but growth remains weakChina’s push for innovation is not lifting productivity