Weekly Updates
Weekly Updates
- Consumers provided a decent foundation for growth in most advanced economies in 2024. A low level of fear about the future kept consumers spending. If fear levels rise, that consumption and economic growth may be challenged. Fears do not have to be justified by reality—animal spirits alone can drive the economy.
- Sentiment and consumer spending data suggest Democrats (in particular) in the US seem to have been fearful that trade taxes mean higher prices, and have rushed to buy in advance. The pattern of consumer durable goods buying suggests “front-loading” consumption, but “buy now” also implies “don’t buy later” and may slow future demand.
- European manufacturing sector workers may fear for their jobs if US consumers are taxed for buying European goods. Because traded goods assume disproportionate importance in popular culture, concern about employment may broaden across the economy.
- There can also be chain effects. On limited evidence to date, US President Trump’s deportation program does not seem to expand that of US President Biden’s. The key difference is publicity, fuelling fear. If agricultural workers fear ICE agents and a Fox News crew raiding their farm, they may not show up for work. Fewer workers and disrupted work schedules push up food prices. That leads to fear of inflation for consumers, changing their behavior.
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