Stalled Spending, Stubborn Prices and Strategic Shifts: America Confronts a Turning Point

Government Shutdown’s Economic Grip Tightens

A prolonged federal shutdown — now into its third week — is beginning to bite across the economy. According to economists cited by Oxford Economics, the standoff between Congress and the White House is shaving roughly 0.1‑0.2 percentage points off annualised GDP growth for each week the shutdown persists.
About 700,000 federal employees have been furloughed and nearly as many are still working without pay, while contractors face daily losses of an estimated $800 million in delayed federal contracts. Consumer spending and productivity are already showing signs of strain, with concerns growing about longer‑term damage if the shutdown prolongs.

Inflation Holds Firm at 3 %—But Markets See Opportunity

On the inflation front, the Bureau of Labor Statistics reported that consumer prices rose 3 % year‑on‑year in September — the fastest pace since January but slightly below forecasts of around 3.1 %. Core inflation (excluding food and energy) also came in at 3 %. Despite stubborn price pressure, markets jumped: the S&P 500 and Nasdaq Composite touched record highs amid expectations that the Federal Reserve may start cutting interest rates.

Trump’s Diplomacy Push to Asia Aims at Investment Surge

President Donald Trump is embarking on a high‑stakes Asia tour, seeking up to $900 billion in new investment commitments from Japan and South Korea to bolster U.S. factories, energy infrastructure, and export capacity. While Japan has pledged about $550 billion and South Korea $350 billion, both deals come with strings attached and remain loosely defined. The effort reflects a broader pivot in U.S. foreign economic policy — aimed at bolstering domestic industrial resilience even as trade tensions with China and others simmer.

Deployment Reversal in San Francisco Signals Shift in Domestic Strategy

In a noteworthy policy reversal, President Trump opted not to deploy the National Guard to San Francisco after the city’s mayor secured his cooperation and local business interests pushed back. The original plan had been tied to addressing crime and homelessness, but the decision signals a subtle recalibration of how federal and local governments interact on security and urban policy. It may also reflect growing sensitivity to backlash over federal intervention in city affairs under the administration’s law‑and‑order agenda.

Markets Surge Despite Shutdown, Reflecting Tech‑Led Optimism

While the shutdown drags on, markets appear largely unfazed — or even encouraged — by the softer inflation print and prospects of easier monetary policy. The S&P 500 and Nasdaq’s record highs underscore underlying investor optimism in sectors like tech and growth stocks.
That said, analysts caution that data gaps caused by the shutdown (notably delayed jobs and economic reports) could obscure underlying vulnerabilities, leaving markets exposed to a surprise downside if the fiscal impasse deepens.

Looking Ahead

In the coming days, attention will focus on whether Congress can break the funding log‑jam and avert a deeper economic fallout from the shutdown, whether the Federal Reserve will signal a rate cut, and how the President’s Asia tour plays out in terms of concrete investment results. Domestic policy watchers will also monitor how federal‑local relations evolve following the San Francisco decision and whether markets maintain their momentum in the face of policy uncertainty.