WeeklyWatch – Congress standoff may cause shutdown

30^th September 2025

Stock Take

A lesser-spotted shutdown coming to the US?

Investors were left with a mixed picture last week as a US government shutdown looked more probable.

Every year by 1^st October, Congress must pass several bills to fund a variety of federal agencies. None have passed so far in 2025, with both political parties – Democrats and Republicans – firmly sticking to their guns. But it’s worth remembering that while the threat of federal shutdowns isn’t uncommon in the news, they rarely actually happen. In fact, there’ve only been 14 shutdowns since 1981, and they have lasted one week each on average, according to investment bank Berenberg.¹

The Chief Economist at St. James’s Place, Hetal Mehta, estimates that a one-week shutdown could trim about 0.1% from annual US GDP growth.

But the wider effect would likely be noticeable in the labour market statistics. As noted in last week’s article, job numbers are of keen interest to the Fed as they’re currently a focus point in their decisions regarding interest rates.

Mehta says:

“How long the shutdown lasts will be important. It would see a temporary rise in unemployment numbers, as federal workers are furloughed through the shutdown. These workers will include Bureau of Labor Statistics employees, which could also cause delays to important upcoming economic releases. Taken together, the Fed might have to make decisions on data they know is not necessarily the full picture.”

Fresh data – new US GDP numbers are in

It was a much more positive outlook regarding US GDP growth for the second quarter, having been revised up 0.5 percentage points to 3.8%.

Increased consumer spending and a decrease in imports were the main boosts behind this. Despite a weakening job market plus increasing inflationary pressure, spending in the US has remained resilient.

UK faces fiscal pressure

Labour headed to Liverpool to kickstart their party conference, which began on 28^th September, and there’s already been a multitude of news stories reporting on the potential next steps for the government.

Chancellor Rachel Reeves’ comments continued to fuel wide expectations for future tax increases, which included her refusal to rule out an increase in VAT. Additionally, it’s believed that getting rid of the two-child benefits cap is being considered, which would cost approximately £3 billion.

Reeves faces a large fiscal black hole, and her challenge is certainly significant – UK government spending for this year is around 45% of the GDP so far. Ahead of the conference, she emphasised the party’s election promise to not raise certain taxes for working people, but speculation among investors continues to develop regarding the upcoming Autumn Budget.

Economic sentiment begins to wane in Germany

The Ifo index, the closely monitored indicator of German business sentiment, revealed a sharp deterioration between August and September – one which surpassed expectations. This comes a week after sports car maker Porsche announced a fourth profit warning in 2025.

Germany’s improving cycle began in February, and this reversal is the first break in the upward trend and stands as a reminder of how quickly business optimism can change. Indeed, weaker demand was recorded in the services, retail and construction sectors.

German exporters are facing a challenging year. A stronger euro has acted as a headwind, as have US tariffs. €500 billion for investment and defence investment has already been pledged by the government; however, the situation could get worse before the impact of the stimulus is felt or operating conditions get better.

Changes for China’s WTO status

As the world’s second-largest economy, China announced last week that they will no longer seek developing country World Trade Organisation privileges. The Head of Asia and Middle East Investment Advisory and Comms at St. James’s Place, Martin Hennecke, put forward three reasons for the decision:

“Firstly, to help facilitate a trade deal with the United States. This question has long been one of the points of contention between them.

“Secondly, it will ease concerns of other nations to whom many exports have recently been redirected. This has led to a record trade surplus, expected to exceed $1.2 trillion this year. Finally, the change arguably represents a realistic reflection of how far China’s development has come.”

Source

¹Berenberg, Macro News – 24/09/2025

Wealth Check 

St. James’s Place, Real Life Advice Report 2025: Chapter 1 – The value of advice in a volatile world

To say this year has been a volatile one would be an understatement! With ongoing geopolitical turmoil, Trump’s tariffs, global conflict and the rise in living costs, the challenge has been immense.

In November, Rachel Reeves will deliver the Autumn Budget, which has continued to be a source of uncertainty for investors, especially regarding tax rises.

In the first chapter of the Real Life Advice Report by St. James’s Place, they look closely at this rising uncertainty on financial behaviour and explain how important financial advice is in navigating the challenges as they arise.

The report addresses how people are feeling affected by the current political and economic backdrop and the scope of the impact, and showcases some interesting figures:

• One in two people feel more uncertain about the future than they did two years ago.
• 76% of this group cited inflation and cost of living as the biggest contributors to their unease.
• 57% of this group said that global conflicts – the Ukraine war and Middle East conflict – were big causes of their unease.

But the noticeable difference was between people taking professional advice or with a financial plan in place versus those who aren’t seeking any advice or plan.

Over half of the people who have a financial adviser and ongoing advice or are executing a full financial plan reported good levels of optimism for the rest of the year (51% and 53% respectively). This is in comparison to only a third of those who don’t seek any financial advice expressing optimism about the next few months. Only 29% of people without a financial plan reported positive sentiment for the rest of 2025.

To read the full first chapter of St. James’s Place 2025 Real Life Advice Report, click here.

Background:

Opinium surveyed 8,000 UK adults nationwide between 22^nd July and 5^th August 2025. Quotas and post-weighting were applied to the sample to make the dataset representative of the UK adult population.

In the Picture 

UK consumer confidence remains low, but the Bank of England’s rate cut has helped slow inflation and made small improvements in sentiment. A sign of resilience?

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SJP Approved 29/09/2025