The Roundup – November 2025
Engine Troubles
The US economy has successfully dodged a number of challenges this year including high interest rates and rising inflation. While its persistent strength has been underpinned by consumer spending, the country’s economic engine may be starting to splutter and the journey ahead offers plenty of potential potholes.
Job security has enabled household spending, with the US unemployment rate consistently between 4.0 – 4.2% for over a year. However, unemployment data for the last two months worsened with September reaching 4.4%, amplified by the 43-day-long government shutdown, with federal government one of the largest sectors for job losses.
Concerns around the negative economic impacts of the government shutdown (now the longest in US history) were captured in November’s reading of consumer sentiment which fell around 6% from a month earlier, to reach its lowest level since mid-2022. Personal finances and expected business conditions also contributed to the decline.
Simultaneously, consumers have experienced higher prices for everyday goods as businesses affected by increased import duties have mostly passed these costs onto customers. Inflation data illustrates increased prices which have been rising since April, while muted sales figures reflected the shift in behaviour as shoppers pulled back from certain spending.
As the world’s largest consumer market, slowing US demand has wider (global) consequences, with export driven economies that are reliant on American buyers, such as China, experiencing a slowdown in manufacturing. October saw US imports of containerised products fall 7.5% compared to a year earlier, shipments from Beijing dropped 16.3%.
While export-facing American businesses have been hurt by trade tensions as the US has become a less stable and attractive trading partner. One clear example is in the agriculture sector where soybean farmers have found themselves supplanted by cheaper alternate (South American) producers by their biggest buyer, China.
The cost of deteriorating US-Chinese trading conditions paved the way for constructive discussions when Presidents Trump and Xi met in person in South Korea, during Trump’s visit to the region. The talks resulted in a de-escalation of tensions with some retaliatory actions put on hold for a year and potential for other measures to be eased further.
Artificially Inflated?
Against reduced household income, a moderation in spending, and higher living costs, the staggering level of spending on AI technology and its infrastructure has been a lifeline to US economy. AI investment has become the new driving force, to the extent that forecasters project the US would be in a recession otherwise.
Hundreds of billions of dollars have been poured into AI-related stocks since the beginning of the year, and these stocks have seen their share prices rocket. Markets are now weighing up whether the magnitude of AI investment and the surrounding hype constitutes a bubble, with investors wary of any signs of weakness or results that may not materialise.
The risk of a sharp AI-induced market correction poses another potential pothole, with wide reaching implications due to the concentration of investor capital and focus tied to one theme. There are vast potential benefits and applications for artificial intelligence, however what’s much less clear is who the ultimate winners and losers of this revolution will be.