Key Takeaways
- White House Adviser Kevin Hassett anticipates a robust rebound in U.S. economic growth to 3-4% by early next year (Q1 2026), despite current disruptions from a government shutdown that has impacted data collection and slowed economic activity.
- UK banks are advocating for an easing of capital rules to manage the escalating surge in private credit, a sector that has grown to over $1.7 trillion globally amid stricter traditional bank regulations.
- California Governor Gavin Newsom has declared President Trump's offshore oil drilling plan "dead on arrival" in the state, signaling a firm stance against expanded drilling despite federal proposals.
- Spain's economy is projected to maintain a similar growth pace, though the Bank of Spain has slightly revised down its 2025 GDP forecast to 2.4%, citing uncertainties primarily from U.S. trade policies.
- A stopgap deal has been reached to end the prolonged U.S. government shutdown, with President Trump hailing it as a "big victory" for House Speaker Mike Johnson and Senate Republican Leader John Thune.
The global economic landscape is currently navigating a mix of optimistic growth forecasts, regulatory challenges in finance, and significant political developments. In the United States, White House National Economic Council Director Kevin Hassett expressed confidence in the nation's economic trajectory, predicting a rebound in growth to 3-4% by the first quarter of 2026. Hassett also noted that the inflation trajectory is "really good," with recent consumer price data falling below projections, indicating momentum towards the Federal Reserve's target.
However, this positive outlook comes amidst the backdrop of a prolonged government shutdown, which Hassett warned has had a "far worse" impact than initially expected. The shutdown has led to incomplete economic surveys for October, potentially creating permanent gaps in U.S. economic data and complicating the assessment of the country's growth outlook. Despite these challenges, Hassett believes the economy will recover strongly once government functions normalize.
UK Banks Grapple with Private Credit Surge
Across the Atlantic, UK banks are pushing for a relaxation of capital rules to address the significant growth in private credit. The private credit market has expanded dramatically post-Global Financial Crisis, now constituting over $1.7 trillion in assets, as stricter capital regulations like Basel III have prompted traditional banks to scale back corporate lending. This shift has created a funding gap that alternative lenders have eagerly filled.
Some global banks are reportedly exploring re-entry into the direct lending market by collaborating with private credit firms, where banks originate loans and private credit firms assume the balance sheet risk. This evolving dynamic, however, has raised concerns about potential systemic risks due to the largely unregulated nature of private credit, with some drawing comparisons to the conditions preceding the 2008 financial crisis.
Spanish Economy Shows Resilience Amidst Uncertainty
In the Eurozone, Jose Luis Escrivá, Spain's Social Security Minister and an ECB policymaker, anticipates the Spanish economy will continue its growth at a similar pace. This comes even as the Bank of Spain has slightly lowered its 2025 GDP growth forecast to 2.4% from an earlier 2.7%, attributing the revision to economic uncertainty, partly influenced by U.S. trade policies. The Bank of Spain also projects inflation to be 2.4% for 2025, gradually slowing to 1.7% in 2026, falling below the European Central Bank's 2% target.
Escrivá highlighted a shift in the economy's growth drivers towards domestic demand, supported by robust household finances and lower interest rates. Spain's economy has notably outperformed other major European economies since 2021, propelled by strong tourism, favorable energy prices, and consistent household spending.
US Political Developments: Offshore Drilling and Shutdown Resolution
On the political front, California Governor Gavin Newsom has taken a firm stance against President Trump's reported plan to expand offshore oil drilling along the California coast, declaring it "dead on arrival." Newsom has been a vocal critic of the Trump administration's environmental policies, accusing it of attempting to "vandalize California's leadership" on climate initiatives. Sable Offshore Corp. (SOC) is reportedly seeking assistance from the Trump administration to advance a California oil project, with its shares seeing a 19% increase to $7.15 following news of the proposed federal plan.
Meanwhile, a significant development in Washington saw President Trump commend House Speaker Mike Johnson and Senate Republican Leader John Thune for securing a "big victory" with a stopgap deal to end the government shutdown. The Senate has passed a short-term spending bill, which is now headed to the House for approval. This agreement was reached with bipartisan support in the Senate, though it caused division among some Democrats who had sought to include healthcare subsidies in the deal. The bill is expected to fund the government through January 2026 and will reinstate federal workers who were furloughed during the shutdown.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.