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President Donald Trump has turned his attention back to trade policy in recent days, threatening to resurrect higher reciprocal tariffs on many countries in another few weeks. He has also indicated that product-specific tariffs on copper, pharmaceuticals …
11th July 2025
Fed in wait-and-see mode The minutes of the mid-June FOMC meeting show most Fed officials content to wait and see what impact tariffs and other government policies had on inflation and the labour market before committing to either holding rates or cutting …
9th July 2025
After stemming the inflow of unauthorised immigration over the Southwest border, the Trump administration now appears to be gradually ramping up the number of detentions and removals. This crackdown is beginning to have a more marked impact on labour …
President Donald Trump has now released “letters” to 14 countries today, announcing that, unless they negotiate a deal over the next few weeks, he will impose reciprocal tariffs on those countries from August 1 st . In most cases, those tariffs that would …
7th July 2025
President Donald Trump has released the first of his “letters” threatening to impose country-specific tariffs of 25% on both Japan and South Korea from August 1 st , if those countries can’t reach a deal with his administration by then. Back in April, …
A weaker dollar should not compound the upward pressure on goods prices from tariffs too greatly given that the greenback remains strong by historical standards and, in any case, the pass-through of exchange rate moves to final consumer prices tends to be …
With the House of Representatives today passing the Senate’s bigger version of the budget reconciliation, the Republicans appear to have met President Trump’s timeline – to have the bill reach his desk for signing by the July 4 th Independence Day …
3rd July 2025
With the House seemingly on the cusp of passing the Senate’s revised budget reconciliation bill, the House looks set to support larger fiscal deficits over the next 10 years than it originally supported. The CBO estimated that the Senate bill would add …
Service sector not firing on all cylinders, but holding up The rebound in the ISM services index in June is broadly consistent with our view that economic growth will slow rather than collapse in the second half of the year. While the prices paid index …
This page has been updated with additional analysis since first publication. Labour market healthy but gains again narrow The 147,000 gain in non-farm payrolls in June was reassuring after the fall in the ADP measure of employment reported yesterday. A …
The JOLTS data suggest the labour market remained healthy in May, with job openings and private sector hiring rising, and layoffs low. However, the sharp rise in accommodation and food services job openings, despite a fall in tourism, is a little …
1st July 2025
Tariff cost pressures are still working their way through supply chains The modest rebound in the ISM headline index to 49.0 in June, from 48.5, should temper concerns of a factory sector collapse driven by tariffs and lingering trade uncertainty. While …
With the Fed divided between doves calling for a rate cut as early as July and hawks expecting no further easing this year, Fed Chair Jerome Powell struck a careful balance in his semi-annual testimony to Congress this week. He offered no signal that a …
27th June 2025
Consumer resilience beginning to fade The rise in core PCE prices in June was partly due to a rise in core goods prices, but the early impact of the tariffs has been unexpectedly muted. Meanwhile, the contraction in real consumer spending last month, …
Overview – We expect tariffs to have only a modest impact on both real economic growth and price inflation. Admittedly, we do see annualised GDP growth slowing to around 1.5% in the second half of this year, but it should gradually recover from the second …
26th June 2025
We forecast a smaller 130,000 gain in non-farm payrolls in June. We expect the unemployment rate to remain unchanged at 4.2%, while average hourly earnings growth likely held steady too, at 3.9% y/y. Payroll gains to remain healthy The 139,000 rise in …
Qatar Airways-Boeing deal steals headlines but underlying data positive The surge in durable goods orders in May was mostly driven by the Qatar Airways-Boeing deal announced during President Trump’s visit, but the small rise in core orders shows there …
Fed’s Powell offers no hint of near-term rate cut Fed Chair Jerome Powell’s prepared semi-annual testimony to the House today offered no hint that a rate cut is coming any time soon. Despite the recent dovish comments from Trump-appointed Governors …
24th June 2025
We assume that the 90-day pause on reciprocal tariffs is mostly extended, keeping tariffs at 10% for countries except China, which will face a steeper 40% levy. Tariffs will not cause a recession – provided Congress can quickly redirect the tariff revenue …
23rd June 2025
Fed remains firmly on the sidelines The Fed’s new interest rate projections still just about show a median of 50bp of cuts to its policy rate for this year, but it was a very close run thing. Back in March, 11 of 19 officials anticipated two 25bp cuts …
20th June 2025
The Fed will remain on the sidelines for some time, waiting to see what impact tariffs will have on price inflation. We suspect that lingering fears of a more persistent impact will persuade the Fed to hold off cutting interest rates until the first half …
18th June 2025
Fed splitting into two camps The Fed’s new interest rate projections still just about show a median of 50bp of cuts to its policy rate for this year, but it was very close. Back in March, 11 of 19 officials anticipated two 25bp cuts this year, with four …
Modest improvement in manufacturing output The modest decline in industrial production in May was driven by the volatile utilities sector; manufacturing and mining both increased, although admittedly only by a little. It is difficult to see a clear impact …
17th June 2025
Temporary drags mask underlying health The weakness in retail sales in May was mostly due to temporary drags from the end of tariff front-running and the unseasonably wet weather in the east of the country, so should reverse in June. Control group retail …
What inflation? The impacts of tariffs were notably limited in May’s CPI and PPI data. Major appliance prices rose by 4.3% m/m, similar to the increase experienced when Trump imposed tariffs on washing machines during his first term. Meanwhile, the price …
13th June 2025
Tariff and inflation fears ease substantially The stronger-than-expected June University of Michigan consumer sentiment index suggests that, despite ongoing policy uncertainty, consumers have become much less worried about both tariffs and inflation. …
The overnight strikes by Israel on Iran mark a major escalation in the conflict in the region and, with the oil market tighter than it was a few months ago, the risks to oil prices look more balanced than we’d previously thought (rather than skewed to the …
A third target-consistent gain in core PCE deflator The softer-than-expected PPI data mean we now estimate that core PCE prices rose by 0.16% m/m in May, marking the third consecutive target-consistent gain. Much like for the CPI, there was only limited …
12th June 2025
Underlying economic strength signals no need to cut Updated SEP may feature higher median interest rate projection Speculation around Powell’s replacement will plague proceedings We expect the underlying strength in the economy and uncertainty over the …
11th June 2025
A deal with China is done, according to President Trump, but its scope seems to be limited to easing some recent non-tariff restrictions, including China’s rare earth export controls. The wider trade and economic issues that were supposed to be the focus …
Trump 1 - 0 Economists The muted 0.1% m/m rise in the core CPI in May is not quite as good as it looks, with our preliminary estimate pointing to a 0.20% rise in the Fed’s preferred core PCE deflator ahead of the PPI data tomorrow. Nonetheless, the data …
The Federal debt is undoubtedly on an unsustainable path. The debt burden is already close to 100% of GDP and, with the budget deficit likely to remain close to 6% of GDP for the foreseeable future, it would hit 120% of GDP within the next decade. …
9th June 2025
A slump in the number of foreign visitors to the US could prove to be a helpful source of deflationary pressure this year, while having a limited impact on GDP growth. Amid the Trump administration’s fretting over the goods trade deficit, it is often …
Tariffs and budget to cancel each other out The latest CBO estimates released this week show that the budget reconciliation will cause the deficit to rise to over 7% of GDP by 2028. Although the deficit is expected to narrow again from 2029, as spending …
6th June 2025
Tariffs taking only a limited toll The 139,000 gain in non-farm payrolls was not as good as it looks, given its narrow breadth and the 95,000 downgrade to payroll gains over the prior two months. Nevertheless, it shows that tariffs are having little …
If President Trump succeeded in his aim of cutting prescription drug prices by 50% “almost immediately”, it could subtract more than 1%-point from headline PCE inflation. There is little indication of how the administration will achieve that aim, however, …
5th June 2025
Trade deficit narrows dramatically, as tariffs end import surge The huge narrowing of the trade deficit in April was largely driven by a steep drop in pharmaceutical product and gold bullion imports, reversing their earlier surge as tariff front-running …
Any short-term boost to domestic steel and aluminium production from higher tariffs is likely to be short-lived and offset by declining output in metal-using industries – making the tariff hike a drag on both manufacturing and the broader economy. After …
4th June 2025
Tariffs causing problems for the service sector The surprise fall in the ISM services index for May suggests that tariff effects are weighing on activity outside of the manufacturing sector, but the Fed is likely to be more concerned by the further rise …
April’s JOLTS data suggest the labour market remained healthy at the start of the second quarter, with job openings rising and layoffs low. While there are some pockets of weakness in areas most at risk from tariffs and the recent fall in foreign …
3rd June 2025
Limited optimism after China-tariff-pause The surprise decline in the ISM manufacturing index in May indicates that tariffs continue to weigh significantly on the sector. While the May data is less gloomy than initially appears, as a sharp decline in …
2nd June 2025
Court rulings leave trade policy in disarray Although this week’s court ruling – that President Trump doesn’t have the “unbounded authority” to impose universal tariffs on other countries – has been temporarily stayed, there is a fair chance that even …
30th May 2025
Drop back in imports & consumer resilience point to big Q2 GDP rebound With imports slumping after President Trump imposed his tariffs in early April and consumer spending continuing to recover after this year’s unusually severe winter, we now forecast …
This report is part of our Future of Europe series. Read more analysis, explore the supporting data, and learn about our broader European coverage on the dedicated Future of Europe page. Europe is being buffeted by geopolitical and geoeconomic shifts but, …
We forecast a 150,000 gain in non-farm payrolls in May. Federal job losses may increase as severance periods end, but initial claims suggest any impact will once again be modest. We expect the unemployment rate to have held steady, while wage growth …
29th May 2025
In this Update, we answer several key questions about how the US Court of International Trade (CIT) tariff ruling might affect the US and other economies. The outlook may now rest on the decision of the Republican-stacked Supreme Court. The upside risks …
Court ruling adds another layer of uncertainty on Trump’s tariffs The ruling by the three-judge panel of the Federal Court of International Trade blocking President Trump’s reciprocal tariffs will presumably be appealed by the administration all the way …
Officials worried that tariff inflation boost could become persistent The minutes of the Fed’s early-May policy meeting were, on balance, slightly hawkish. In particular, “almost all participants commented on the risk that inflation could prove to be more …
28th May 2025
Muted PPI suggests core PCE inflation still on downward trend The March PPI data show the folly of relying too much on the CPI data. Our calculations suggest that, based on the combined inputs from PPI and CPI, core PCE prices increased by a more muted …
Resilience of core orders likely to be temporary The rebound in core durable goods orders in April wraps up a month of solid activity data, underscoring that tariffs have yet to inflict the severe damage on the economy some had feared. Nonetheless, the …
27th May 2025
