A flurry of US economic data has just been released, as statistics bodies clear the decks ahead of the Thanksgiving holiday tomorrow.
First of all, we have confirmation that the US economy grew faster than European rivals in the last quarter.
US GDP is estimated to have risen by an annualised rate of 2.8% in July-September, the same as was estimated last month. That’s the equivalent of 0.7% growth quarter-on-quarter, much faster than the UK’s 0.1% growth, and the 0.4% recorded in the eurozone.
The U.S. economy grew at a 2.8% annualized rate in Q3, the same rate estimated a month ago.#GDP
— BEA News (@BEA_News) November 27, 2024
On trade, the US trade deficit has narrowed – to $99.1bn in October, down $9.6bn from the $108.7bn deficit recorded in September.
Imports fell faster than exports:
Exports of goods for October were $168.7bn, $5.6bn less than September exports.
Imports of goods for October were $267.8bn, $15.2bn less than September imports.
Key events
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The increase in US GDP in the last quarter was due to increases in consumer spending, exports, federal government spending, and business investment.
The BEA reports:
The increase in consumer spending reflected increases in both goods and services. Within goods, the leading contributors to the increase were other nondurable goods (led by prescription drugs) and motor vehicles and parts (led by used light trucks). Within services, the leading contributor to the increase was health care (both outpatient services and hospitals).
The increase in exports primarily reflected an increase in goods (led by capital goods, excluding automotive).
The increase in federal government spending primarily reflected an increase in defense spending.
The increase in business investment primarily reflected an increase in equipment (led by information processing equipment as well as transportation equipment).
The increase in imports primarily reflected an increase in goods (led by capital goods, excluding automotive).
There’s a subdued start to trading on Wall Street, where the Dow Jones industrial average has gained 75 points, or 0.17%, to 44,935 points.
There’s more action among small company stocks, though, lifting the Russell 2000 index by 1%.
ShareRouble hits lowest since March 2022
The Russian rouble has lurched to its lowest level since the early days of the full-scale invasion of Ukraine.
The rouble has plunged by over 7.3% today to 113 roubles to the dollar, its weakest level since mid-March 2022.
A chart showing the rouble against the US dollar Photograph: LSEG
The latest drop came just days after the US introduced sanctions against Gazprombank, Russia’s third-largest bank, which played a key role in processing payments for the remaining Russian natural gas exports to Europe.
My colleague Pjotr Sauer reports:
Earlier rounds of sanctions had spared Russian gas because Europe’s economy was so dependent on it, but it is now far less reliant on Russian supplies. The Gazprombank sanctions raise the prospect of a further decrease in gas revenues and foreign currency for Moscow.
The rouble’s weakening threatens to erode Russians’ purchasing power by increasing the cost of imported goods and could further increase inflation.
The country is already contending with runaway inflation, which could climb to 8.5% this year – twice the Central Bank’s target.
US unemployment claims remained low last week.
There were 213,000 new initial claims for jobless support last week, a drop of 2,000 compared with the previous week.
Today’s US GDP report shows that disposable personal incomes kept rising in the last quarter, despite inflation taking a bite out of pay packets.
The Bureau of Economic Activity says:
Disposable personal income increased $122.9 billion, or 2.3 percent, in the third quarter, a downward revision of $43.1 billion from the previous estimate. Real disposable personal income increased 0.8 percent, a downward revision of 0.8 percentage point.
ShareUS economy “clearly motoring” after 2.8% growth in Q3
Today’s US GDP report looks to be good news for Donald Trump – suggesting he will take control of an economy in good shape.
Lindsay James, investment strategist at Quilter Investors, says:
“The US economy is clearly motoring. The second reading of Q3 annualised US real GDP growth has come in at 2.8%, in line with expectations and following 3% growth delivered in Q2, and 1.6% seen in Q1.
“Rising real wages, falling interest rates and likely falling taxes and deregulation are all factors that are usually good news for stocks, and markets are already performing strongly in factoring in the better than expected growth.
“US GDP has defied expectations throughout 2024, having been helped along by numerous factors. Consumer confidence levels, which have been consistently dreadful and would have indicated otherwise, do not seem to have deterred spending. Instead, US consumers continued with purchases, if more selectively in lower income households, which has played a significant role in boosting the economy.
“While growth has proven unexpectedly strong this year, looking ahead, Trump’s Cabinet picks combined with a set of economic policies that are substantially un-tested in modern developed world economies mean that the range of outcomes for 2025 is wide. Nonetheless, expectations for the US economy are now much higher than they were, reflected by stock market gains of around 30% year to date.
“With an impending sugar high from Donald Trump on the horizon, the US economy should continue to grow at a similar rate. However, it will take some time for the true nature and impact of the president-elect’s policies to materialise.
As covered in the introduction, Bank of England deputy governor Clare Lombardelli have warned that the president-elect’s proposed trade tariff would pose a risk to economic growth in countries including the UK.
Updated at 09.02 EST
US durable goods rise, less than forecast
Orders for durable goods at US factories rose last month, but by less than expected.
Orders for durable goods – tangible products that can be stored or inventoried and that have an average life of at least three years – increased by 0.2% in October, less than the 0.5% expected.
That follows a 0.4% fall in September – possibly a sign that customers are getting orders in before new tariffs are imposed on imports?
Excluding transportation equipment, new orders increased 0.1%. Excluding defense products, new orders increased 0.4%.
ShareUS growth confirmed at 2.8%/year
A flurry of US economic data has just been released, as statistics bodies clear the decks ahead of the Thanksgiving holiday tomorrow.
First of all, we have confirmation that the US economy grew faster than European rivals in the last quarter.
US GDP is estimated to have risen by an annualised rate of 2.8% in July-September, the same as was estimated last month. That’s the equivalent of 0.7% growth quarter-on-quarter, much faster than the UK’s 0.1% growth, and the 0.4% recorded in the eurozone.
The U.S. economy grew at a 2.8% annualized rate in Q3, the same rate estimated a month ago.#GDP
— BEA News (@BEA_News) November 27, 2024
On trade, the US trade deficit has narrowed – to $99.1bn in October, down $9.6bn from the $108.7bn deficit recorded in September.
Imports fell faster than exports:
Exports of goods for October were $168.7bn, $5.6bn less than September exports.
Imports of goods for October were $267.8bn, $15.2bn less than September imports.
ShareTrade tariffs make it harder to keep prices low, IKEA executive says
New US tariffs could push up the cost of furniture at IKEA.
The chief financial officer of the world’s biggest furniture retailer has told Reuters that the proposed tariffs would make it harder for IKEA to keep prices low.
Juvencio Maeztu explained that some 30% of IKEA products are sourced from Asian countries including China, with 70% coming from Europe, adding:
“For us, trade barriers around the world, whether it is from one country or another country, are limiting the possibilities to make things more affordable for the many people.
“We will keep working with governments and with our supply chain to try to mitigate the impact and to hope to secure affordability.”
Donald Trump’s threat of a 25% tariff on Canadian imports could push Canada into recession, fears Rogier Quaedvlieg, senior US Economist at ABN AMRO.
Quaedvlieg told clients today:
From the perspective of Canada and Mexico, the tariffs are a hard blow. Exports to the US account for 74 and 80% of all exports of Canada and Mexico, and 20 and 26% of total GDP.
Tariffs in the first Trump administration led to a percentage decrease in real consumption of about half the magnitude of the tariff percentage. This very conservative estimate gives a GDP hit of 2.5 and 3.25% to Canada and Mexico, enough to push at least Canada into a recession. Second order effects on dependent industries would amplify the impact.
The countries reacted with shock to the announcement of such a strong measure. Canada seemed to try and appease President Trump, while Mexico threatened retaliatory tariffs. China on the other hand reacted mildly, seeing their promised 60% tariff downgraded to a mere 10%, although there is nothing to suggest that this proposal would replace the universal tariff touted during the elections.
ShareTrump’s tariff plan will send prices ‘through the roof’, warn US firms
Callum Jones
Manufacturers across the US are bracing for disruption from Donald Trump’s planned new tariffs – and warning their customers could be hit – my colleague Callum Jones reports:
Donald Trump set the business and political world alight late on Monday. The incoming president said he would impose a 25% tariff on goods from Mexico and Canada and hit China with more levies on day one of his term.
“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” he wrote on Truth Social.
Scott Harris has been here before. Eight years ago Catoctin Creek, the Virginia whiskey distillery he runs with his wife, Becky, was generating 11% of its sales in Europe – and expecting to more than double its business there the next year. Then the trade war kicked in.
After Trump imposed steep tariffs on foreign steel and aluminum, the European Union hit back with retaliatory duties, including 25% on American whiskey. “That 11% went to zero,” recalled Harris.
While that initial wave of tariffs was repealed, today Catoctin Creek has “no meaningful business” left in Europe, he said. “A few thousand dollars, but nothing to speak of.”
Trump’s return to power sets the stage for a new trade war. The president-elect campaigned on a pledge to impose sweeping tariffs in a bid to revitalize the US economy. Officials in key markets are already considering if, and how, they would retaliate.
Back in Paris, shares in French financial companies are continuing to fall – amid worries that PM Michel Barnier’s government could be brought down by a row over a belt-tightening draft budget.
Insurance group AXA are down 5%, with bank Société Générale losing 3.5%.
Yesterday, Barnier warned that France could face fiscal calamity should lawmakers decide to topple his government over a budget dispute.
He told French broadcaster TF1 that “There’s likely to be a serious storm and serious turbulence on the financial markets” if the government were to collapse.
French bond prices are pretty flat, though. But with German bond price rising, the spread between Paris and Berlin’s borrowing costs has widened to a 12-year high:
A chart showing the difference between French and German borrowing costs Photograph: LSEG
Bob Savage of BNY says:
The French markets today are back to worrying about the risk of another election. The coalition government is stuck with 2025 budget battles and cracks in support with the National Rally far-right pushing back.
There are broader implications about political risks everywhere. First is that in 2024, the voters have kicked on incumbents -signaling frustration over cost of living and national interests. Second is that deficits built up from pandemic responses are now problematic as debt servicing and austerity plans clash against fragmented coalitions.
Setting what is most important in the years to come is the role of political leaders – and the best way forward will be to lead with growth but spending more money will not work in the same way it did during 2020. The problems of current policy and future policies show up most clearly not in FX or Equities but in Bonds. The risk premium for French debt is an example and a lesson for other governments.
Updated at 08.16 EST
Wizz Air executive fined for trading during closed periods
Britain’s financial regulator has fined the former chief supply chain officer of budget airline Wizz Air Holding over £125,000 for trading company shares when he wasn’t allowed to.
András Sebők breached City rules by trading Wizz Air shares in the restricted 30-day period leading up to the firm’s financial results announcements, the FA says, and also didn’t notify the FCA and Wizz Air of his personal trades within the required 3 business days.
The trading took place between April 2019 and November 2020, when Sebők made 115 trades in Wizz Air shares, worth over £4m in total.
This is the first time the FCA has fined a person discharging managerial responsibility (PDMR) for trading company shares during closed periods, under Article 19(11) of the Market Abuse Regulations (MAR), it says.
Updated at 06.31 EST
Sarah Butler
Pets at Home boss Lyssa McGowan has broken ranks on the implications of cost rises linked to the government’s budget – saying they won’t necessarily lead to price rises.
McGowan said Pets at Home’s bill from the changes to National Insurance and the minimum wage would mean £18m in extra costs for the specialist retailer, but this was in line additional cost from the increase in the minimum wage last year, which the chain had been able to absorb through various efficiencies helped by new technology.
“We absorbed that [£18m] and kept costs flat,” McGowan said, adding that the company had no plans to change its strategy because of the budget measures.
“£18m, some of which was unexpected, is a lot of money but like all retailers we are looking at all avenues to ameliorate that. It is not a given at all that we will have to put up prices.”
She said she was feeling “confident and optimistic” about the run up to Christmas despite a “subdued consumer” environment, as households were turning to Pets at Home’s own-label pet food, for example, as a way to save money helping the business grow in a flat market.
She said shoppers were still prepared to buy treats – with the group’s premium pet advent calendars quickly selling out, for example – but were being careful in many other areas. Pet food has seen high levels of price inflation in recent years, and McGowan said prices had now flattened, but not come down.
In addition a surge in the number of pets in the UK has now flattened out, with the number of pets stabilising, so that Pets at Home is signing up 15,000 kittens and puppies a year to its loyalty scheme, half the level during the height of the pandemic pet boom.
Pets at Home’s share price dived 13% this morning, as the retailer warned that the subdued consumer environment would continue into the spring, hitting annual profits. Analysts at Peel Hunt trimmed £10m off their forecast, taking it down to £135m.
Updated at 06.42 EST
Here’s Susannah Streeter, head of money and markets at Hargreaves Lansdown, on Aston Martin’s cash call:
Aston Martin might be known for its association with James Bond, but there’s no secret agent in sight to pull it out of its latest scrape. Instead, it’s gone cap in hand to investors to raise money by issuing new shares after posting another profit warning, just months after flagging difficulties in September.
The company has hit another troublesome speed bump, with production slowed down by supply chain issues, affecting deliveries of its super-high end Valiant models. This is coming on top of a deceleration of demand in China, a crucial market for the luxury car maker.’’