The sweeping tariffs announced by the US administration on April 2nd have sent shockwaves through global markets and exposed deep contradictions in the strategy underpinning them. While billed as a corrective to US trade imbalances and a lever for industrial revival, the policy has triggered immediate financial aftershocks—equity sell-offs, capital outflows from emerging markets, rising volatility, and a collapse in sentiment. All that said, the global economy received a brief reprieve on April 9th, as President Trump announced a 90-day pause on his sweeping “reciprocal” tariffs. However, intensifying US-China trade tensions (see chart 1) continue to cast a long shadow over the outlook. A broader point here is that for all the geopolitical signalling and near-term protection, tariffs are unlikely to restore lasting balance to US trade. US fixed investment patterns and advanced technology production show the country’s competitive edge lies in intellectual property and high-value services, not goods susceptible to border taxes (chart 2). With the U.S. economy still growing faster than many of its peers, import demand is structurally strong, and supply chain substitution will take time—if it happens at all (charts 3 and 4). Meanwhile, markets are still pricing in a hit to earnings and extreme policy uncertainty (charts 5 and 6).
Global| Apr 10 2025Charts of the Week: Mission Impossible and Fallout
by:Andrew Cates
|in:Economy in Brief
- Federal receipt growth slows.
- Outlay growth surges.
by:Tom Moeller
|in:Economy in Brief
The Consumer Price Index edged 0.1% lower in March after rising 0.2% in February and 0.5% in January. A 0.1% rise had been expected in the Action Economics Forecast Survey. The y/y increase in the headline CPI fell to 2.4% from 2.8% in February. It was the weakest y/y gain in six months and was below the 9.1% peak in June 2022. The CPI excluding food & energy rose 0.1% following increases of 0.2% in February and 0.4% in January. A 0.3% rise had been expected. The 2.8% y/y gain is the weakest in core prices in four years and below the 6.6% peak in September 2022.
Energy prices declined 2.4% (-3.3% y/y) last month after a 0.2% February rise. Gasoline prices declined 6.3% (-9.8% y/y) after falling 1.0%. Fuel oil prices weakened 4.2% (-7.6% y/y) after rising 0.8% in February. Natural gas prices jumped 3.6% (9.4% y/y) following a 2.5% gain, and electricity prices gained 0.9% (2.8% y/y) after rising 1.0% in February.
Food prices rose 0.4% (3.0% y/y) in March after a 0.2% February increase as egg prices strengthened 5.9% (60.4% y/y) following a 10.4% gain. Meat, poultry & fish prices rose 0.6% (3.1% y/y), after a 0.5% rise, while dairy product prices rebounded 1.0% (2.2% y/y) and reversed February’s 1.0% decline. Cereal & bakery product costs eased 0.1% (+1.1% y/y) after February’s 0.4% rise while fruit & vegetable prices dropped 0.5% (-0.7% y/y), the same as in both of the prior two months. Nonalcoholic beverage prices rose 0.6% (2.4% y/y) in March after falling 0.5% in February.
Goods prices less food and energy eased 0.1% both m/m and y/y in March after rising 0.2% in February. Prices of used cars and trucks fell 0.7% (+0.6% y/y) last month after rising 0.9% in February while new vehicle costs improved 0.1% (0.0% y/y) after slipping 0.1% in February. Apparel prices increased 0.4% (0.3% y/y) following a 0.6% gain while appliance prices eased 0.1% (-2.5% y/y) following a 0.5% increase. Home furnishings prices held steady (-0.3% y/y) after rising 0.2% in February. Recreation product costs fell 0.3% (-2.3% y/y) in March after falling 0.7%. Education & communication product costs rose 0.5% last month (-5.7% y/y) after falling 0.2% in February.
Services prices less energy improved 0.1% (3.7% y/y) last month following a 0.3% March gain. Shelter prices rose 0.2% (4.0% y/y) last month after a 0.3% rise as owners equivalent rent of primary residences increased 0.4% (4.4% y/y) after four consecutive 0.3% increases. The cost of lodging away from home fell 3.5% (-2.5% y/y) after improving 0.2% in February. Rents of primary residences gained 0.3% (4.0% y/y) for the fourth consecutive month. Transportation service prices fell 1.4% (+3.1% y/y) after falling 0.8% in February reflecting a 0.8% decline (+7.5% y/y) in the cost of motor vehicle insurance. Public transportation costs declined 4.2% (-3.5% y/y) after falling 3.4% in February. Prices of medical services increased 0.5% (3.0% y/y) after rising 0.3% and the cost of recreation services edged 0.1% higher (4.3% y/y) after increasing 0.8 in February.
The Consumer Price figures can be found in Haver's USECON database. The expectations figure is contained in the AS1REPNA database.
by:Tom Moeller
|in:Economy in Brief
USA| Apr 10 2025Unemployment Insurance Claims Rise Just 4,000 in Latest Week
- Initial claims modestly less than forecast.
- Continuing claims decrease, and prior week revised down slightly.
- Insured unemployment rate still 1.2%, now since January 2024.
Europe| Apr 10 2025European IP Still Mixed Across Early Reporters
The overall assessment of EMU-wide IP is not yet possible. But a slew of early reporters (eight in this table) along with two northern European countries have issued reports on manufacturing production in February. They are mixed in February with four up, and four down. January has five ups and three downs. December has five down and three up. So, the numbers cluster around 50-50 with some variation. The Northern European countries are showing monthly gains except for Norway in December.
The sequential trends showing growth rates over three months, six months, and 12 months, show three EMU nations with output falling and five increasing over three months, then four have output up and four down over six months. Over 12 months, five countries have output down and three with output up. The sequential growth rates do show a trend toward having more nations with expanding output. Germany, Finland, and Greece show decline on all three horizons. France shows output declines over six months and 12 months while Spain shows a decline only over 12 months. The northern European countries of Sweden and Norway log increases on all horizons.
From 12-months to 6-months to 3-months, the EMU median reading steadily progresses to a stronger reading. The median change at an annual rate is -0,7% over 12 months, -0.3% over six months and +3.0% over three months. Monthly data do not give a ‘clear look’ at trends. In December, the median output change on month-to-month data is -0.7%, which shifts sharpy to a gain of 0.9% in January. February saw the median also post an increase, a bit weaker than January at 0.3%. Still, it was an increase, and it was better than the December rate of -0.7%.
- Inventories trend higher y/y.
- Sales surge broadly.
- Inventory-to-sales ratio continues to decline.
by:Tom Moeller
|in:Economy in Brief
USA| Apr 09 2025Mortgage Applications Surge as Rates Fall in Latest Week
- Refinanced loans nearly double; purchase loan applications are strong as well.
- Fixed-rate mortgages decline.
- Average loan size surges.
by:Tom Moeller
|in:Economy in Brief
Japan| Apr 09 2025Japan’s Confidence Falls and Stays Low
Japan’s confidence is still weak and in a down cycle. Since reaching a sharp peak early in 2024, confidence continues to recede. All components are showing decline on all horizons from 12-months to 6-months to 3-months. This is an extremely uniform response.
Consumer confidence has a 15-percentile standing on data back to 2004. Components of the confidence index has standing that range from a standing at the 47.8% mark for the valuation of assets to a low at the 6.1 percentile mark for willingness to purchase durable goods.
In keeping with this weakness, the overall livelihood standing is at its 10.2 percentile.
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