Post by : Badri Ariffin

The U.S. economy appears to be powering ahead, with the Atlanta Fed’s GDPNow model estimating a robust 3.9% annualized growth for the third quarter. At first glance, this figure signals strength in a period when many expected a slowdown. However, economists caution that the ongoing government shutdown may be masking the true state of the economy.

With key economic data delayed or unavailable, the GDPNow model relies on incomplete information, leaving analysts to question whether the strong numbers fully reflect reality. In addition, recent signs of weakening in the labor market could dampen growth more than currently indicated, creating a picture that is potentially rosier than the underlying conditions warrant.

Interest rate speculation is also heating up. Investors are increasingly betting on the Federal Reserve to ease rates, with expectations for potential cuts in the coming months influenced by persistent inflation, a cooling jobs market, and recent trade tensions.

In the housing sector, U.S. home prices in September inched up just 0.2% from the previous month, following the same modest gain in August. Year-on-year, prices have risen 3%, marking the slowest annual increase since 2012. Elevated mortgage rates and cautious buyers have kept the market in a near-standstill, with inventory gains further limiting price growth.

Meanwhile, banks are borrowing more from the Federal Reserve’s standing repo facility, signaling tighter conditions in funding markets. Although volumes remain modest, increased usage suggests that banks are struggling to find cheaper liquidity, a development that could influence future Fed policy decisions regarding the balance sheet.

Globally, inflation pressures are also noticeable. Canada’s inflation rate accelerated to a seven-month high, the U.K.’s inflation held steady unexpectedly, and Japan’s exports rebounded after months of decline. These international trends add layers of uncertainty to the economic outlook, influencing trade and monetary policy decisions worldwide.

As the data landscape remains uneven and key indicators continue to evolve, the U.S. economy faces a period of cautious optimism. While headline growth figures are impressive, underlying challenges—from a strained labor market to housing market stagnation—highlight the complexity of the current economic environment.

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