Fiscal week #32 - 2025

Good morning,

It's time to provide you with the update on fiscal flows for week 45 of the fiscal year.

Fiscal Impulse

For week 45, there was a drain in spending. Money was withdrawn from the private sector—not much, but a $3.3 billion drain. This is essentially negligible considering the $124.7 billion in spending from the week before. However, looking at the implied figures (which are based on historical patterns), the outcome seems unusual. We were expecting a $28 billion spending flow, the lowest of the period, but it did not materialize. We may argue that this is due to tariffs, but we don't consider that particularly significant.

For now, we saw a drain, but the impulse on a 4-week average basis remains strong, so there's nothing to worry about. On a nominal basis, we are not accelerating—we are simply moving sideways, as shown in the image below. Year-to-date impulse remains strong and above 2023 levels, close to 2022 impulse levels.

When adjusting for GDP, we get a similar picture as shown below. Currently, we stand at 5.28% of GDP, 78 basis points above the same period last year and overall above historical and 3-year averages. There's nothing to worry about. We would be concerned if we continue to see subdued flows going forward, but until the last three weeks of September, we should see positive flows. We expect a total of $267 billion, or $66.95 billion per week over the next month, which is bullish for risky assets but could put some pressure on bonds.

Unemployment Benefits

On a nominal basis, unemployment benefit payouts were quite low at $784 million, though this was still $116 million above the same period last year. This brings the 1-month average to $91.8 million. When looking at year-over-year data, we do see a pickup, but in the grand scheme of things, nothing to be extremely concerned about. We already discussed the reasons for this last week.

We report below the chart for benefits adjusted for labor force.