Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.At his State of the Union address early last month, US President Joe Biden proudly hailed the American economy as “the envy of the world”. It is hard to disagree. America has had the strongest post-pandemic economic recovery of all G7 nations. Annual inflation has fallen 6 percentage points from its summer 2022 peak, and the unemployment rate remains near record lows, even as interest rates have risen. To top it off, the S&P 500 is soaring.Despite the impressive national economic data — which Biden reeled off in his speech — surveys suggest Americans put more faith in Donald Trump to handle the economy. Consumer sentiment also remains below pre-pandemic levels. What explains the disconnect? Rising political polarisation is one driver — Democrat voters do tend to be more optimistic about the economic outlook. But partisan divides are only part of the story. Ultimately, it is the economic realities of daily life that matter most to individuals. And in America’s colossal economy, what is true for the whole is rarely true for its parts.The US economy is significantly larger than all other G7 economies — but also its most unequal by income. As in other advanced economies, globalisation, financialisation and automation have been behind a growing divide between urban and non-urban areas. Between 1980 and 2021, America’s geographic income inequality rose over 40 per cent, according to the US Department of Commerce. The Biden administration has placed emphasis on reindustrialising left-behind regions, but commitments from the Inflation Reduction Act and Chips Act will take time to deliver new factories and sufficient jobs on the ground.These divides mean the strong headline economic numbers mask large differences in the lived experiences of households and businesses across the country. First, large urbanised areas — including tech and finance hubs — have driven economic growth since the pandemic, while smaller metro and rural areas have continued to lag behind.Second, although inflation is falling nationally, the cost of living — which factors highly into voters perceptions of the economy — also varies widely. States including Nevada, Utah, Arizona and Idaho — where Biden’s approval ratings are currently polling below the US average — have also experienced above average price-level increases between January 2021 and the start of this year, according to data compiled by Moody’s Analytics. Quarterly transitions into debt delinquency are also trending well above the national average in Texas and Florida, where Trump continues to have strong support.Third, consumer spending — which has been strong, despite the higher cost of credit — has been propped up by the wealthiest Americans, who are also benefiting from rising home and equity valuations. But there are significant signs of stress elsewhere. The share of newly delinquent credit card borrowers on lower incomes has risen above 2019 levels, the number of multiple jobholders has picked up, and even some discount retail stores are struggling.Finally, while the attention has been on the “Magnificent Seven” tech stocks, optimism and hiring plans among small businesses — which employ close to half of the country’s private sector workforce — have been dropping.America’s recent strength has surprised most. But dig beneath the surface and the country’s economic weaknesses — and its political divides — become clearer. For a nation the size of a continent, with vast inequalities, aggregate data is obscuring. As markets place bets on the US economy and politicians campaign, it pays to break it down. More

Trade groups have reacted angrily to a UK government announcement that consignments of EU plant and animal products will face charges of up to £145 when imported into Britain from the end of this month.Businesses warned that the “common user charge” set by ministers for the main Channel port of Dover would drive up food prices and deter EU producers from exporting to the UK as of April 30.The British Chambers of Commerce said the Department for Environment, Food and Rural Affairs had “failed to listen” to industry over the charges. Defra said earlier on Wednesday that the charges would apply to all consignments entering the UK via government-run border controls at Dover and the Eurotunnel, which handle the bulk of UK food imports. Trucks coming into the country can carry multiple consignments.William Bain, head of trade policy at the BCC, said the charges of £29 an individual commodity line — capped at five charges per consignment, meaning a maximum fee of £145 — would be a “hammer blow” for smaller importers. “Importing a small consignment of goods with only five different meat, poultry, egg, milk or some fish products in the ‘medium-risk’ category will now face a bill of £145 per package under these proposals,” he added, urging the government to reconsider. Ministers have come under mounting opposition from the plant and food sectors over the introduction of post-Brexit border controls on imports from the EU.The checks have been delayed five times since the UK formally left the bloc in January 2021, but the government insists they are necessary to improve biosecurity and level the playing field for British businesses that face similar controls and charges when exporting to the EU.Since January EU exporters have had to supply extra paperwork on the provenance of plant and animal products, known as Export Health Certificates (EHCs). Physical inspections at the border begin on April 30, while an additional layer of security documentation will be required from October.The common user charge will be £29 for products classified as high- and medium-risk, and £10 for low-risk products and goods in transit across the UK. Jonas Aurell, managing director of ScandiKitchen, a London-based delicatessen. The company is already struggling to import products, including sausages More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Jay Powell said the Federal Reserve’s job of bringing down inflation was “not yet done” and the US central bank needed “greater confidence” that price pressures were easing before cutting interest rates, striking a cautious tone on any quick changes to monetary policy. Powell’s comments at Stanford University’s Business School on Wednesday come after the latest projections from Fed officials in March showed they expected to cut rates by 0.75 of a percentage point this year, down from its 23-year high of 5.25 per cent to 5.5 per cent. But strong data on the labour market, and signs of stubbornly high inflation, have cast doubt on those forecasts. Powell said the recent data did not “materially change the overall picture” and noted that “on inflation it is too soon to say whether the recent readings represent more than just a bump”. However, he noted: “We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down towards 2 per cent.” Powell’s comments align with the views of other Fed officials who have recently indicated the central bank is in no rush to reduce interest rates, reducing the likelihood of a first move in the next few meetings. But they still leave room for the Fed to begin cutting rates in the second half of 2024.“We have time to let the incoming data guide our decisions on policy,” Powell said. “The outlook is still quite uncertain, and we face risks on both sides.” Powell’s prudence on interest rates came as he stressed the importance of the central bank’s independence to allow it to set policy free from “short-term political matters”, and warned against “mission creep” at the Fed, saying “we are not, nor do we seek to be, climate policymakers”. His message may be particularly important amid a presidential election race year pitting Joe Biden against Donald Trump. Trump picked Powell to run Fed during his tenure, but the former president was frequently critical of the central bank chair and repeatedly urged him to lower rates. Powell also on Wednesday announced the Fed would this year launch a new review of its monetary policy framework, which guides its rates decisions, after the last one was completed in 2020 at the height of the pandemic. The review, which is expected to last about a year, is roughly in line with the central bank’s plans to update the document every five years. The last one began in 2019 and was completed before the surge in inflation that started in 2021, and was considered more dovish on inflation than the previous framework. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Gold prices surged to an all-time high on Wednesday as traders responded to signals that the US Federal Reserve was preparing to cut interest rates later this year even as inflation remained stubbornly above the central bank’s target.The haven asset has rallied 15 per cent since mid-February after gaining 0.6 per cent to touch $2,295 a troy ounce on Wednesday, also boosted by concerns over the potential for an escalating conflict in the Middle East. Two Fed officials said on Tuesday that three interest rate cuts this year would be “reasonable”, even though the world’s largest economy continues to perform strongly, with consumer prices rising slightly in February. Gold, which offers no yield to investors, tends to benefit from a fall in so-called real interest rates — borrowing costs adjusted for inflation.“The expectation for falling real rates remains an important driver for the bullish outlook on gold,” said Joni Teves, a precious metals analyst at UBS. “As long as the Fed stays dovish, there is a risk of even larger declines in real rates should inflation surprise on the upside.”Analysts said that traders were buying gold — known as an inflation hedge — to protect themselves against the risk of a rise in inflation, which would push real rates lower.Brent crude, the global oil benchmark, has crept up about 18 per cent since the middle of February to reach almost $90 a barrel, fuelling anxiety about a rebound in inflation.“The market is interpreting that the Fed is willing to accommodate higher inflation as it cuts rates,” said Michael Widmer, commodities strategist at Bank of America. Gold extended its gains despite Fed chair Jay Powell saying that the central bank’s job in bringing down inflation was “not yet done”.Investors are starting to pay increasing attention to gold as a protection mechanism against concerns about high US debt levels, something that will be a focus in the run-up to the presidential election this year, according to Widmer.Gold’s rally had been given further impetus by investors buying call options in the futures market, aiming to profit from a rally driven by voracious demand from central banks and Chinese consumers, who are snapping up gold at record levels.Analysts also said that Israeli strikes on an Iranian consulate in Syria had further burnished gold’s appeal as a haven.“Strength begets strength,” said Robin Bhar, an independent precious metals consultant. “[Gold] seems to be in the hands of the speculative traders who are piling in and wanting to see this thing move much higher.” Gold remains a significant distance from its real terms all-time high from 1980, equivalent to more than $3,000 a troy ounce after adjusting for inflation.However, some analysts caution that gold’s surge from more than $1,800 a troy ounce six months ago looks overdone, particularly given the risk that the Fed and other big central banks lower interest rates more slowly than expected because of high inflation.“The US economy is surprising with its strong performance, which would make a first interest rate cut in June less likely and thus weigh on the gold price,” said Alexander Zumpfe, senior precious metals trader at Heraeus, a refinery of precious metals. But he added that “it seems as if gold turns every market development into a price increase”. More