The Weekly Briefing from Capital Economics

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

How reliant is the US economy on the AI investment boom? It’s a question Group Chief Economist Neil Shearing keeps getting in client meetings. On this episode of The Weekly Briefing, he tells David Wilder why there’s more to the story than hype around a new technology. Neil also explains why France faces a political – but not an economic – crisis, and what to make of China’s toughest moves yet to control rare earth exports.Also on the show, six months after Liberation Day, Deputy Chief Markets Economist Jonas Goltermann assesses how predictions of the dollar’s demise have played out and unpacks the market’s striking response to Japan’s new LDP leader.Analysis and events referenced in this episode:Watch: US Outlook – Weighing the AI boom, labour constraints and the Fed’s next chapterRead: China tightens its grip on rare earths (again)Register: Markets Drop-In: Asset Allocation in 2026 – Why we don’t think the AI equities boom is overRead: Japan coalition talksRead: What would PM Takaichi mean for Japan?

Our new Global Economic Outlook has just been published – and it makes for a striking contrast. In the US, the drag from Trump’s policy agenda looks set to be outweighed by an AI-driven investment boom that may already be lifting productivity. In Europe, by contrast, the optimism seen earlier this year has faded as structural headwinds continue to hold growth back.In this episode of The Weekly Briefing, Group Chief Economist Neil Shearing explores how AI may be transforming America’s potential, even as Europe struggles with long-standing weaknesses.Plus, a decade on from a devastating market crash, Asia-Pacific Markets head Thomas Mathews unpacks what’s been driving China’s equity boom this year – despite the broader economic weakness – and how sustainable it really is.Analysis and events referenced in this episodeGlobal Economic Outlook: US leads, others lag, in uneven global economyDrop-In: US Outlook – Weighing the AI boom, labour constraints and the Fed’s next chapterDrop-In: China Outlook – Can policy reverse economic weakness?The economic and market impact of AIMore upside for China’s stock market as its AI+ plan gets going

Tariffs are back in the headlines after Donald Trump’s latest announcements – but how much of a threat do these new levies really pose? Could they fuel inflation pressures, and is Trump’s trade policy really bringing manufacturing jobs back?Neil Shearing joins David Wilder to assess Trump’s tariff threats, explain why Stephen Miran’s call for US rates to be halved doesn’t add up, and examine what’s driving the divergence between inflation in the US and Europe/UK.Also on the show, Latin America Economist Kimberley Sperrfechter looks at an extraordinary week in Argentina, where markets have steadied after Washington intervened. What drove the Trump administration to act so forcefully, and will the support work?Analysis and events referenced in this episode:Data: Tariff Impact ModelRead: US Tariff AnnouncementRead: Japanese manufacturers starting to shift production to USRead: Euro-zone inflation risks now to the downsideDrop-In: From bonds to equities – The great pensions switch and its risksDrop-In: Where is r* heading? Catching up on equilibrium real ratesDrop-In: UK Outlook – More tax rises to add to economy’s woes​​Read: Mapping China’s presence in Latin America​