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Fears of trade war as Trump announces import tariffs

Economic Roundup:

Fears of a possible trade war were sparked this week as President Trump announced new US tariffs on imports of steel and aluminium. The US move was thought likely to trigger retaliation from the EU and China.

Meanwhile, hawkish comments from new Federal Reserve chair Jay Powell increased speculation that the US will see four – rather than three – interest rate rises this year.

Data released this week showed US consumers are feeling their most optimistic since 2000.

UK consumer confidence, by contrast, was down in February, according to GfK’s index of household sentiment. Respondents were less optimistic about the economy and said they were less willing to spend.

GfK said that consumer confidence will remain subdued until Britons felt a positive impact on their inflation-squeezed finances.

Even so, borrowing on credit cards jumped £746m in January – its largest increase since 2005 – according to Bank of England data.

UK house prices were 0.3% lower in February, according to Nationwide, but remain 2.2% higher than a year ago.

The building society said the monthly decline was consistent with a “softening” in the household sector.

This chimes with other research showing the housing market is in poor shape, with fewer buyers looking for homes, fewer homes coming on to the market, and the prospect of rising mortgage rates.

UK manufacturing activity declined to an eight-month low in February. The IHS Markit/CIPS manufacturing purchasing managers’ index (PMI) fell to 55.2 – indicating continued expansion but the slowest rate of growth since last summer.

Duncan Brock, director at the Chartered Institute of Procurement and Supply, said manufacturing activity had “crawled at a snail’s pace” in February.

“Amidst these signs of a moderate slowdown, it was supply chain disruptions that were largely at fault,” he said. “Suppliers underperformed not only on the timely delivery of goods but in their inability to meet the demand from makers for some raw materials.”

Confidence among construction companies remained at multi-year lows in February even as activity in the sector beat expectations. The IHS Markit/CIPS UK construction PMI came in at 51.4, up from 50.2 in January.

IHS Markit said the “soft patch” continues for the sector. Housebuilding, which was the bright spot for construction companies last year, was weak for a second month in the row: “Residential work remained on track for its weakest quarter since Q3 2016.

However, there was good news on the public finances, with the government eliminating the deficit in its day-to-day budget. Official figures for the 12 months ending in January showed a £3bn surplus in the current budget.

Paul Johnson, director of the Institute for Fiscal Studies, said the deficit reduction was “quite an achievement given how poor economic growth has been… but it has come at the cost of an unprecedented squeeze in public spending”.


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Important Notes:

Main source of information: Company Report and Accounts, Bloomberg

 

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