Evelyn Reynolds

The Bank of England is focused on the potential U.K. growth shock from U.S. tariffs if there is a slowdown in global trade, the central bank’s governor Andrew Bailey said Thursday.
Going into its May 8 monetary policy meeting, the central bank will consider “arguments on both sides” around the impact of tariffs on growth and domestic supply constraints on inflation, he said.
Bailey added that he did not see the U.K. as being close to a recession at present, but that it was clear economic uncertainty was weighing on business and consumer confidence.

The Bank of England is focused on the potential impact of U.S. tariffs on U.K. economic growth if there is a slowdown in global trade, the central bank’s governor Andrew Bailey said Thursday.
“We’re certainly quite focused on the growth shock,” Bailey told CNBC’s Sara Eisen in an interview at the IMF-World Bank Spring Meetings.

Going into its May 8 monetary policy meeting, the central bank will consider “arguments on both sides” around the impact of tariffs on growth and domestic supply constraints on inflation, Bailey said.
“There is clearly a growth issue we start with, with weak growth … but a big question mark is how much of that is caused by the weak demand, how much of it is caused by a weak supply side,” he continued.
“Because the weak supply side, of course, unfortunately, has the sort of the upside effect on inflation. So we’ve got to balance those two. But I think the trade issue is now the new part of that story.”
Inflation could be pulled in either direction by wider forces, with a redirection of trade exports into other markets being disinflationary, but a retaliation on U.S. tariffs by the U.K. government — which he stressed did not appear likely — pushing up inflation.
Bailey added that he did not see the U.K. as being close to a recession at present, but that it was clear economic uncertainty was weighing on business and consumer confidence.

IMF downgrade

The IMF earlier this week downgraded its 2025 growth forecast for the U.K. to 1.1% from 1.6%, citing the impact of U.S. President Donald Trump’s trade tariffs, higher borrowing costs and increased energy prices.
However, economic forecasting remains mired in uncertainty as countries engage in negotiations with U.S. officials over Trump’s swingeing universal tariff policy, currently on pause. The U.S. has imposed 25% tariffs on steel, aluminum and autos and a 10% levy on other British exports.
U.K. policymakers have expressed hopes of reaching a trade deal with the White House, with U.S. Vice President J. D. Vance saying there is a “good chance” of an agreement.
Bailey told CNBC on Thursday that he would be “very encouraged if the U.K. does make a deal,” but that its economy was very open and services-oriented, so it would still be impacted by a wider slowdown in growth or trade.
He also noted that inflation would increase from the current 2.6% in the coming readings due to effects from markets such as energy prices and water bills, but that the bump up would be “nothing like what we saw a few years ago.”
The Bank of England held interest rates at 4.5% at its March meeting, before Trump shocked the world with the scale of his tariff announcement.
Markets now see the BOE slashing rates to 4% by its August meeting. More

So-called durable goods orders soared a seasonally adjusted 9.2% on the month, up from a 0.9% gain in February and well ahead of the Dow Jones forecast for a 1.6% increase.
In other economic news Thursday, the Labor Department reported that initial claims for unemployment insurance rose to a seasonally adjusted 222,000.

Companies in March accelerated their orders for big-ticket long-lasting goods ahead of President Donald Trump’s aggressive tariffs on U.S. imports, the Commerce Department reported Thursday.
So-called durable goods orders soared a seasonally adjusted 9.2% on the month, up from a 0.9% gain in February and well ahead of the Dow Jones forecast for a 1.6% increase. Excluding defense, the increase was even higher, at 10.4%, though the ex-transportation number was flat.

Transportation equipment orders surged 27%, led by a 139% increase in nondefense aircraft and parts. In addition to aircraft and autos, the durables category also includes items such as appliances, computers and jewelry.
In other economic news Thursday, the Labor Department reported that initial claims for unemployment insurance rose to a seasonally adjusted 222,000 for the week ending April 19, an increase of 6,000 though roughly in line with the Wall Street consensus of 220,000.
On the durables goods side, the advanced report reflects a pull-forward effect as Trump dangled threats against U.S. trading partners through March before announcing his “Liberation Day” duties on April 2. Trump slapped a 10% tariff against all imports as well as a select charges against dozens of countries that he ultimately tabled for 90 days for negotiations.
A Federal Reserve report Wednesday indicated that companies were adjusting behavior to get ahead of the Trump tariffs.
The economic summary, known as the “Beige Book,” said companies in particular saw an increase in vehicle sales, which would fall under the durables category, “generally attributed to a rush to purchase ahead of tariff-related price increases.”

The report otherwise showed apprehension about economic conditions, particularly in light of the tariffs, indicating that the burst in durables orders for March is likely not indicative of the long-term broader environment.
On the labor front, the jobless claims report showed that layoffs are not rising despite Trump’s efforts to slice the federal employment rolls.
In addition to the stable weekly numbers, continuing claims, which run a week behind, declined to 1.84 million, down 37,000 from the prior week. Claims in Washington, D.C. also fell, down to 753, or a decrease of 112 from the prior week, according to unadjusted numbers.
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Businesses dealing with the early stages of President Donald Trump’s tariffs are looking for ways to pass increasing costs onto consumers, according to the Fed Beige Book report.
Broadly speaking, the report characterized economic growth as “little changed” from the March 5 report, though it noted that “uncertainty around international trade policy was pervasive.”

In an aerial view, a container ship is seen docked at the Port of Oakland in Oakland, California, on April 18, 2025.
Justin Sullivan | Getty Images

Businesses dealing with the early stages of President Donald Trump’s tariffs are looking for ways to pass increasing costs onto consumers, according to a Federal Reserve report Wednesday.
As Trump ordered against-the-board levies on U.S. imports and higher duties on Chinese products, the Fed’s Beige Book indicated how they plan to proceed. Companies reported getting notices from suppliers about rising costs, and they looked to find ways not to absorb the increases while noting uncertainty over the ability to pass them along to customers.

“Most Districts noted that firms expected elevated input cost growth resulting from tariffs,” the report said. “Many firms have already received notices from suppliers that costs would be increasing.”
Broadly speaking, the report, which comes out about every seven weeks, characterized economic growth as “little changed” from the March 5 report, though it noted that “uncertainty around international trade policy was pervasive across” the Fed’s 12 districts.
Prices generally rose during the period, which included Trump’s April 2 “liberation day” announcement of the blanket tariffs. Employment was “little changed” amid falling headcounts in government jobs.
“Firms reported adding tariff surcharges or shortening pricing horizons to account for uncertain trade policy,” the report stated. “Most businesses expected to pass through additional costs to customers. However, there were reports about margin compression amid increased costs, as demand remained tepid in some sectors, especially for consumer-facing firms.”
In the New York area, firms reported rising prices particularly in food and insurance along with construction materials. Manufacturers and distributors said they already are adding surcharges due to shipments.

There also were signs of problems in the trade dispute with Canada. Tourists are booking fewer hotel rooms in New York City and at least one tech firm reported losing business contacts in Canada.
“The outlook for service sector firms worsened noticeably, with contacts anticipating a sharp decline in activity in the coming months. Service sector firms reported a major pullback in planned investment,” the report said.
The report also noted the impact that the Elon Musk-led Department of Government Efficiency has had on employment in the Washington, D.C. region. DOGE has sought to pare back the federal workforce, laying off thousands and offering buyouts to others.
While the employment picture overall was “unchanged” for the period, “many federal government workers were laid off or put on administrative leave in recent weeks.”
“These cuts to the federal workforce have impacted businesses throughout the entire district. In addition, federal contractors have laid off workers in response to spending cuts. For example, a research organization headquartered outside the DC-region laid off workers due to contracts being cancelled. Similarly, a Northern Virginia consultancy reduced headcount by 25 percent due to losing half their contracts,” the report added.
Elsewhere in the report, service organizations dependent on government support noted difficulties since the White House began culling through agencies that get federal aid. The report specifically cited food banks in New York as seeing cuts in programs and personnel.
“Contacts at non-profits and other community-based organizations expressed significant concern about the future of federal funding and services support, creating challenges in staffing, strategy, and planning,” the report said.
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Shoppers walk through the King of Prussia Mall, as global markets brace for a hit to trade and growth caused by U.S. President Donald Trump’s decision to impose import tariffs on dozens of countries, in King of Prussia, Pennsylvania, U.S., April 3, 2025. 
Rachel Wisniewski | Reuters

Consumer spending is rising at a faster clip this month as everyday Americans rush to make purchases before President Donald Trump’s full tariff plan takes effect, data released Wednesday from JPMorgan shows.
Spending through the first 15 days in April climbed about 3.8% from the same period a year ago, JPMorgan found. Spending in March increased about 2.7% from the comparable month a year ago.

The pickup in spending shouldn’t be construed as heralding faster economic growth, however. “April data may reflect a pullforward of discretionary spending on big-ticket items if consumers tried to lock in lower prices before tariffs went into effect,” JPMorgan analysts led by Richard Shane wrote to clients in a note on Wednesday.
Much of the April gain came from discretionary spending, which rose by 4.3% in the first 15 days year-over-year, versus 2.9% growth in non-discretionary spending.
Psychological impact
JPMorgan’s data offers early hard evidence of how Trump’s plan for steep tariffs on imports has affected the psyche of American consumers. While Trump placed many of his planned levies on a 90-day pause soon after announcing them, anecdotal reports show Main Street consumers bracing for what many view as a seismic shift in global trade.
To be sure, JPMorgan noted that some of the growth in spending may have also been tied to the Easter holiday, which fell almost three weeks later in 2025 than in 2024. The analysts also pointed to sliding gasoline prices as a possible driver of increased discretionary spending.
Still, the potential for some binge buying before the full effect of Trump’s tariff policy is felt has altered the short-term economic outlook for small business owners and policymakers alike.

At first, “activity might look artificially high … and then by the summer, might fall off — because people have bought it all,” Austan Goolsbee, president of the Chicago Federal Reserve, recently told CBS in reference to the acceleration of spending by consumers trying to get ahead of tariffs. A temporary bump in spending may lead to a corresponding drop-off in spending during the summer, he said.
Inventory stockpile
Goolsbee also cited evidence of businesses stockpiling inventory to last two to three months and said so-called preemptive purchasing appeared more common among companies than consumers.
Shippers have front-loaded cargo heading to the U.S. to get ahead of any potential increase in taxes as a result of the tariffs, according to CNBC’s Supply Chain Survey. Products from China, which face a cumulative tariff rate of 145%, accounted for much of the cargo shippers were sending to the U.S. earlier than planned.
This idea of an expedited spending timeline by consumers is popping up on first-quarter corporate earnings calls, too, as Wall Street analysts study whether demand for products ranging from smartphones to automobiles could fall later.
AT&T finance chief Pascal Desroches said Wednesday that customers have upgraded devices at a faster clip than expected since Trump unveiled his tariff plan.
Capital One CEO Richard Fairbank told analysts on Tuesday that upticks in spending on electronics and cars looked like signs of consumers speeding up purchases before the full tariff plan goes into effect. Ally Financial CEO Michael Rhodes said last week that a pull-forward in used car purchases could account for what he called strong volume recently seen by the auto loan provider.
Capital One and Ally’s anecdotes dovetail with data from Cox Automotive, which found U.S. vehicle supply plunging as consumers rushed to purchase.
The historical record shows that an acceleration in spending to beat higher prices later on doesn’t amount to much over the long term. For example, Japanese consumers in 1997 rushed to buy before a consumption tax rose to 5%, and again in 2014 and 2015 before the tax climbed to 8% and 10%, respectively. Afterward, however, spending either fell or flat lined, according to a Federal Reserve Bank of Richmond study.
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