Poor US consumer data puts pressure on president Donald Trump, as cost of living concerns rise ahead of the country’s holiday season.
Ahead of coverage and expert insight on today’s Autumn Budget, a new report suggests that Brexit has caused greater economic damage than previously thought, creating tougher choices for UK chancellor Rachel Reeves.
US consumer woes
A flurry of poor economic data released yesterday (25 November) has raised questions about Trump’s handling of the US economy.
Consumer confidence dropped to its second-lowest level in five years this month, with retail sales for September rising just 0.2%. While still an increase, this figure reflects a significant deceleration in comparison to summer figures and was lower than Wall Street forecasts, the FT reports.
Wholesale inflation, which anticipates consumer inflation, stood at 2.7% for the year to September. This was also higher than economists had expected.
Trump said at the White House’s annual Thanksgiving turkey pardoning ceremony that his administration is working to “making incredible strides to make America affordable again”.
Recent initiatives include reversing its own tariff measures on a number of agri-products, such as beef, coffee and bananas, in a bid to cut the cost of living.
While a government’s press release touted the reduced cost of Thanksgiving staples from popular retailers this year, economists have warned that the picture is more murky, with one report suggesting shoppers who stick with brand-name items face a 10% hike.
Speaking to the Guardian, David Ortega, a food economist and professor at Michigan State University, said that while costs will vary between shoppers, consistency lies in the “tremendous amount of uncertainty” many face after years of inflation. Beyond Trump’s policies:
“What people are really attuned to and what they’re reacting to is the cumulative effects of inflation. We’ve seen price increases over the past few years. Food prices are more than 25% higher [than five years ago], and this has been top of mind for many consumers.”
Brexit report
While the headlines have made much of the potential £30bn fiscal blackhole Reeves will be aiming to plug with today’s budget, a new report has estimated that the cost to the UK economy of leaving the EU could be as much at £90bn.
A new report published by US think tank the National Bureau of Economic Research found that the UK economy could be between 6-8% smaller than it otherwise would have been, had the UK remained in the EU.
In the months leading up to the budget, Reeves and other cabinet members have taken a stronger stance on the economic damage caused by Brexit. This came as the government’s attempts to “reset” the UK’s relationship with the EU.
Speaking to the Independent, CEO of European Movement UK, Sir Nick Harvey, said that Reeves would be “facing very different choices this week if the UK hadn’t mangled its ties to its biggest trading partner”.
“The red tape and uncertainty of the past nine years have hit every single one of us in the pocket.”
Liberal Democrat leader, Sir Ed Davey, urged the government to do more to fix “our broken relationship with Europe”.
Customs Union bill
This follows the Lib Dems’ plans to propose a bill on the creation of a new Customs Union with the EU, which will be brought before parliament in early December.
While the bill is unlikely to succeed, the party hopes to highlight a wide base of pro-EU MPs amenable to the idea.
Ahead of both today’s budget and the bill, Davey said:
“The chancellor has admitted the damage Brexit has done to our economy, including burying British businesses in mountains of red tape, yet the government is refusing to take the steps needed to fix it.
“A customs union with the EU is the single biggest lever this government could pull to turbocharge the UK economy.”
Export Control insights
On a webinar yesterday (26 November), hosted by the Chartered Institute of Export & International Trade and sponsored by law firm Womble Bond Dickinson, two top trade lawyers spoke on the changing attitude towards export controls and sanctions by both Westminster and Washington.
“It’s no secret to anybody in the audience that the US has a massive proliferation of sanctions programmes,” said Alan Enslen, a partner at Womble Bond Dickinson, adding that there were 40 different sanctions programmes being maintained by the US.
Both Enslen and Ashley Borthwick, a fellow partner at the law firm, said there had been a change in sanctions enforcement in both the UK and US, with a strict approach taken by both.
“The number of penalties, and the size of the penalties, have increased significantly”, Borthwick told the audience of the UK’s approach. He highlighted the size of the fines, one of which had cleared £3m, as well as the new ‘name and shame’ approach, which could result in reputational damage.
Elsewhere in the headlines
- One export the UK will be trying to limit is plastic waste, and a report has suggested that investing in 15 recycling plants while cutting exports could create 5,400 jobs, the Guardian reports
- The UK moved a step closer to ratifying its trade deal with India, as the Department for Business and Trade published its Section 42 report the agreement. The report, taking its name from that section 42 of the Agriculture Act 2020, outlines how the trade deal is consistent with UK requirements to upholds laws on human, animal and environmental health
Yesterday in Trade
- Russian and US officials met in Abu Dhabi to continue talks on peace with Ukraine, as conflicting plans and expectations continue to stall progress
- A western ‘steel alliance’ could be on the cards, as a meeting of the OECD’s steel committee said more “coordinated actions” were required to curb oversupply
You can read more on those stories here.
