US Economy: Weekly Commentary – September 1, 2025

US Market Review

Short-term bonds saw larger price gains than long-term bonds. Equities were broadly lower, with small caps rising. The energy sector advanced, while consumer staples and utilities declined. The US dollar strengthened. Oil rose modestly, gold reached new highs, and Bitcoin fell.

In August, government bond yields generally declined, with short-term maturities significantly outperforming their longer-term counterparts. Global yield curves continued to steepen, largely driven by movements in the 30-year segment. In the United States, the spread between 2-year and 30-year yields widened to its highest level since January 2022. Notably, foreign central banks now hold more gold than US Treasuries, marking the first occurrence of this trend since 1996.

Equity markets were broadly lower, with small-cap stocks as a notable exception. Large-cap equities fell 0.10%, micro-cap stocks declined 0.27%, while small caps advanced 0.15%. The “Magnificent 7” posted a modest decrease of 0.05%. Sector performance was mixed: energy gained 2.55%, whereas consumer staples and utilities each retreated by more than 2%.

In currency and commodity markets, the US dollar strengthened by 0.26% against the euro. WTI crude oil increased 0.38%, amid a weak price outlook influenced by rising supply from both OPEC+ and non-OPEC+ producers, slower post-summer demand growth, and ongoing uncertainties surrounding US trade policy. Gold rose 2.90%, reaching new highs, while Bitcoin declined 1.50%.

US Market Views Synopsis

U.S. GDP rose to 3.3% on strong trade and domestic demand. Housing remained mixed with weaker sales and affordability issues. Consumer sentiment fell amid inflation concerns and uncertainty.

U.S. Q2 GDP was revised upward to 3.3%, the strongest expansion since Q3 2023, reflecting robust domestic demand and a sharp rebound in net trade, with personal consumption and private fixed investment both strengthening, while inventories and government spending weighed slightly; net trade contributed a notable +4.95%, reversing Q1’s drag, and real final sales to private domestic purchasers rose 1.9%, underscoring resilient underlying demand. In a technological shift, the U.S. government began publishing GDP data on public blockchains like Bitcoin, Ethereum, and Solana to enhance transparency and verification, signaling broader institutional acceptance of crypto infrastructure. Meanwhile, the housing market showed mixed signals: July’s new home sales exceeded forecasts but remained 8% below last year, supported by incentives, smaller homes, and price cuts, while pending home sales slipped 0.4% MoM but rose 0.7% YoY, reflecting ongoing buyer caution amid affordability constraints and economic uncertainty. Consumer sentiment declined 6% in August on inflation concerns, weaker buying conditions, and a gloomier outlook for business and labour, with inflation expectations edging higher and remaining politically divided.

GDP

U.S. Q2 GDP was revised up to 3.3%, driven by strong domestic demand and net trade. The government now publishes GDP data on public blockchains for verification.

The Q2 GDP was revised upward from 3.0% to 3.3%, marking its strongest expansion since Q3 2023. The revision reflects a sharp rebound in net trade and stronger domestic demand. Personal consumption increased from 0.98% to 1.07%, while private fixed investment rose significantly from 0.08% to 0.59%, corroborating earlier indications from hyperscaler data. Inventories modestly subtracted from growth (-3.29%), reflecting reductions in stockpiled goods accumulated during tariff-driven buying. Net trade contributed a robust +4.95% to GDP, a dramatic turnaround from Q1’s -4.62% impact, while government spending shifted slightly from a small positive contribution to a minor drag (-0.03%). Notably, real final sales to private domestic purchasers, a measure combining household consumption and private investment, grew 1.9% in Q2, 0.7 percentage points above prior estimates, underscoring strong underlying domestic demand.

In a parallel development for technology and data integrity, the U.S. government has initiated the distribution of GDP data on public blockchains, including Bitcoin, Ethereum, and Solana, embedding cryptographic hashes to ensure verification of the information. This initiative, supported by the Commerce Department, represents a significant step toward integrating blockchain technology into official economic reporting and reflects growing government acceptance of cryptocurrency infrastructure as a tool for enhancing transparency and data reliability.

We expect economic growth to remain uncertain, with high inflation, weak labour markets, and ongoing uncertainty surrounding tariffs. Even so, the news about starting to publish data on blockchain is positive for crypto.

Housing Market

New home sales exceeded expectations in July but remain 8% lower YoY. Incentives, smaller homes, and price cuts support demand, while pending home sales show modest growth amid ongoing affordability challenges and economic uncertainty.

New home sales reached an annualized pace of 652k in July, exceeding expectations, with June’s figure revised upward to 656k from 627k. Despite this, sales remain 8% lower YoY, and supply is elevated at 9.2 months compared with the pre-pandemic average of 5.6 months. Builders have increasingly relied on incentives such as mortgage rate buydowns, upgrades, and price reductions to stimulate demand. However, the persistence of subdued sales suggests these measures are losing effectiveness amid affordability challenges, rising resale inventory, and broader economic uncertainty. According to NAHB, 66% of builders offered sales incentives in August, the highest share since the pandemic, while 37% implemented price cuts, contributing to a nearly 6% YoY decline in the median new home price to $403,8k. Part of this decline reflects a shift in product mix, with the median new home selling for roughly $19k less than the median existing home. Despite these headwinds, new home sales remain above pre-pandemic levels, demonstrating some resilience in demand and the impact of incentives, though builder sentiment in August remained negative for the 16th consecutive month, with expectations for single-family sales near late-2023 lows. Builders are also responding to affordability pressures by constructing smaller homes, with Census data showing median square footage in Q2 2025 at its lowest since 2009, while the share of new homes priced below $400k increased from 43% in July 2024 to 50% in July 2025.

Pending home sales declined 0.4% MoM in July but rose 0.7% YoY on a seasonally adjusted basis, reflecting continued buyer caution despite recent improvements in mortgage rates, affordability, and inventory. The West was the only region to record a monthly gain, supported by strong inventory growth that gives buyers more choices and intensifies competition among sellers, helping temper price pressures. Overall, the market remains sluggish, as affordability challenges and broader economic uncertainties including employment, inflation, and financial stability, discourage many prospective buyers even in markets with softer prices and abundant inventory. While the Federal Reserve’s recent shift toward a more accommodative policy may gradually reduce borrowing costs and expand the pool of qualified buyers, the effects will take time, leaving the housing market dominated by caution as buyers await clearer signs of economic confidence before committing.

We expect continued weakness in the housing sector, with affordability and inventory pressures persisting, alongside labour market softness that could further weigh on demand and builder sentiment.

Consumer Sentiment

Consumer sentiment dropped 6% in August. Inflation concerns weakened finances and buying conditions. Expectations for business and labour worsened. Inflation outlook rose slightly, differing by political affiliation.

Consumer sentiment confirmed its preliminary reading in August, falling 6% from July and reflecting a broad-based decline across age, income, and wealth groups. Although confidence remains roughly 11% higher than in April and May, it is still at least 10% below levels observed six and twelve months ago. Elevated price concerns weighed heavily on household assessments, driving buying conditions for durable goods to a one-year low and reducing current personal finances by 7%. Expectations for business conditions and labour markets also contracted, though outlooks for personal finances were unchanged, albeit subdued relative to a year earlier. Few respondents referenced recent developments at the Bureau of Labour Statistics or the Federal Reserve. Inflation expectations moved higher, with year-ahead projections rising from 4.5% to 4.8% and long-run expectations edging up from 3.4% to 3.5%. The increase was driven primarily by Independents and Republicans, while Democrats’ expectations remained flat. Despite these gains, both short- and long-term measures remain well below the highs recorded earlier in 2025.

We expect consumer sentiment to remain weak in the near term, with inflation pressures persisting and the outlook for price stability remaining uncertain.