CONSUMER WATCH
February U.S. Light-Vehicle Sales Maintain Growth; Inventory Resumes Gains
Sales are recording solid gains, but production slowdowns capping dealer stock in a growth market – a market that ostensibly still is climbing out of the trough caused by the pandemic and supply-chain issues – suggest the industry overall wants to maintain profit margins but also has a high level of uncertainty about 2025 and does not want to be in a position of having to make sudden, bigger cuts if the market weakens at some point this year.
CalculatedRisk: “On a seasonally adjusted annual rate basis, the Wards forecast of 15.9 million SAAR, would be up 1.9% from last month, and up 1.5% from a year ago.”
- The Average Age of US Passenger Cars: 14 Years (Apollo)
Trump says tariffs on Canadian and Mexican imports going ahead
U.S. President Donald Trump said he intends to move ahead with punishing tariffs on Canadian and Mexican imports in the coming days despite efforts to persuade the administration to back off on trade measures that would hurt the integrated North American economy. (…)
Mr. Trump said the “tariffs are going forward on time and on schedule.” (…)
If Canada is hit by sweeping, broad-based tariffs from U.S. President Donald Trump, the hit to the Canadian economy could be permanent, Bank of Canada governor Tiff Macklem is warning. (…)
“We may eventually regain our current rate of growth, but the level of output would be permanently lower. It’s more than a shock — it’s a structural change,” he said. (…)
He said the Bank of Canada estimates an 8.5 per cent decline in the first year following broad-based tariffs, with Canadian exporters expected to respond by cutting production and laying off workers.
He said, “With exports to the United States accounting for roughly one-quarter of our national income, the shock would be felt across Canada.”
This would lead to lower household income, he said.
And Canada’s retaliatory tariffs would mean higher inflation.
“As a result, consumer spending on everything from cars to entertainment and housing would slow,” he said, projecting a 2.5 per cent decline in consumer spending by mid-2027.
Macklem said broad-based tariffs would “wipe out growth in the economy” for 2025 and 2026, forcing Canadian businesses to cut investment spending. (…)
U.S. to Hit Chinese Ships With Hefty Port Fees Proposal would hit shipping giants Cosco and Maersk with millions in new fees to enter U.S. ports
The proposal, unveiled on Friday by the office of the U.S. Trade Representative, would impose millions of dollars in new fees each time one of these vessels enters a U.S. port, adding costs that would likely be passed down to U.S. importers and exporters through higher freight rates.
Chinese shipyards accounted for more than half of the cargo ships, tankers and other ocean vessels that were built in 2023 to ferry goods across the seas for everyone from Amazon to Volkswagen, as well as U.S. farmers and energy producers.
(…) China operated about 19% of the world’s commercial fleet as of January 2024, according to the U.S. government
The proposed fees would also affect large non-Chinese companies such as Maersk and MSC, who have purchased scores of vessels from China’s busy shipyards. Big boxships make multiple port calls to U.S. ports, substantially multiplying the fees. (…)
Chinese-built ships face fees of up to $1 million for each U.S. port call based on the size of a company’s Chinese fleet, even those vessels that don’t sail to the U.S. There would be a second fee of up to $1 million based on how much of a company’s future ship orders come from Chinese shipyards.
And for Chinese-owned operators like Cosco, there would be an additional fee of up to $1 million for each U.S. port call based on the ship’s size.
“For containerships their costs will be at least 10 times higher than existing charges and affect American importers, exporters and consumers,” said Lars Jensen, chief executive of Demark-based Vespucci Maritime, who advises several top shipping lines. “I hope that the public debate will avert this madness.”
The proposal also mandates that a certain amount of U.S. exports are moved on U.S.-flagged and U.S.-built vessels. It seeks to restrict 1% of U.S. exports this year to vessels run by U.S. operators. The restriction would increase over time so that in seven years, 15% of exports would need to move on U.S.-flagged vessels, including 5% on U.S.-built vessels.
The U.S. no longer produces any significant number of commercial oceangoing ships. Several shipyards have only one big customer, the U.S. Navy, and those yards are often battling backlogs, worker shortages and cost overruns. Most of the commercial ships that China doesn’t produce these days come from South Korea or Japan.
Apollo Management’s Torsten Slok offers a great chart package on inflation. None of the charts include anything tariffs related yet:
The Outlook for US Inflation
There is a long list of forces pushing inflation higher, including tariffs, rising wage growth, higher inflation expectations, easy fiscal policy, easy financial conditions, residual seasonality, and a slowdown in apartment deliveries putting upward pressure on rents later this year, see complete list below. Our latest inflation outlook is available here.
Euro-Zone Wage Growth Cools From Record, Backing ECB Cuts Fourth-quarter negotiated pay up 4.1% after 5.4% gain in third
(…) The data back the ECB’s assumption that salaries are set to rise more slowly from here after they caught up to the consumer-price surge of recent years. That should eventually also lead to easing services inflation, which has been stuck around 4% for months and is a lingering concern for policymakers. (…)
The ECB has relied on various indicators to monitor pay growth in the region, including a tracker meant to predict future developments. That measure continued to signal a sharp slowdown this year when it was updated earlier this month.
Euro-area firms also told the ECB that they expect pay increases to slow to 3.6% this year from 4.3% in 2024. A further deceleration is seen in 2027. (…)
