Economy

LOS ANGELES/BEIJING (Reuters) -U.S. imports from China finished the year strong after some companies stockpiled shipments of apparel, toys, furniture and electronics ahead of President-elect Donald Trump’s plan to impose new tariffs that could revive a trade war between the world’s economic superpowers.Trump, who has threatened to slap tariffs of 10% to 60% on goods from China, takes office on Jan. 20. During his first term, Trump mainly targeted Chinese parts and components. Economists and trade experts predict his next wave of tariffs could apply to finished goods. “There has thus been an uptick in the exports of final goods from China to the U.S., as importers aim to front-run possible tariffs on consumer items,” said Frederic Neumann, chief Asia economist at HSBC in Hong Kong.Chinese trade officials on Monday said December exports surged to record levels.The large rise was in part a reflection of concerns about escalating trade protectionism, Lv Daliang, spokesperson for the Chinese customs administration, said at a press conference in Beijing. U.S. seaports handled the equivalent of 451,000 40-foot containers of goods from China in December, a year-over-year increase of 14.5%, according to trade data supplier Descartes Systems Group (NASDAQ:DSGX). That capped a year when U.S. imports of bedding, plastic toys, machinery and other products from China rose 15% from 2023, according to Descartes. Helen of Troy Ltd (NASDAQ:HELE), seller of OXO kitchen gadgets, Hydro Flask water bottles and Vicks over-the-counter medicines, contributed to that increase. It has been building strategic inventories aimed at reducing exposure to tariffs, executives said on an earnings call last week. “The inauguration is literally days away. I think we’ll get some more clarity once President-elect Trump is in office,” Helen of Troy CEO Noel Geoffroy said of new U.S. tariff policies.Tool and electrical and plumbing supply distributor MSC Industrial (NYSE:MSM) Direct sources roughly 10% of its inventory from China. It is stocking up on its most popular products that could be at risk from new tariffs while developing promotional campaigns for goods made in the United States, executives told investors last week.Teasing out the true effect of the risk of Trump tariffs on overall import gains is difficult because companies closely guard trade data.RESILIENT DEMANDFurther complicating the analysis, resilient U.S. shoppers have been fueling demand. Some importers also brought in safety stocks to protect against disruptions from Houthi attacks on shipping near the Suez Canal trade shortcut and a labor dispute at seaports on the U.S. East Coast and Gulf of Mexico.Meanwhile, Trump also has threatened to tariff goods from many other countries, including North American neighbors Mexico and Canada.Walmart (NYSE:WMT), the biggest user of container shipping, is among the retailers that cargo data analysts say have ramped up imports in recent months. Walmart did not comment on that assessment.Several categories of U.S. imports from all geographic sources posted meaningful gains during the fourth quarter, according to S&P Global Market Intelligence.Textiles and apparel jumped 20.7%; leisure products, chiefly toys, gained 15.4%; home furnishings increased 13.4%; and household appliances and consumer electronics posted gains of 9.6% and 7.9%, respectively, according to S&P. Consumer staples categories such as household and personal care, as well as food and beverages, rose 14.2% and 12.5%, S&P said.Michael O’Shaughnessy, CEO of Element Electronics Corp., said there was a year-end rush to get goods into the United States. Element imports components, mainly from China, for its flat-screen TV assembly plant in Winnsboro, South Carolina – America’s last large-scale television production plant. It also imports finished televisions. The company built buffer stocks when dockworkers were threatening to shut the East Coast ports it uses.Still, O’Shaughnessy said there’s a limit to how much he’s willing or able to bring in.”There’s just no place to put everything,” he said. “Also, there are working capital constraints. Every day it sits there it costs you money.” More

(Reuters) -The U.S. economy ended 2024 with a slight to moderate increase in activity and a tick upward in employment, the Federal Reserve said on Wednesday, but businesses flagged a range of concerns about the potential for policies under President-elect Donald Trump to push prices higher. The findings, which draw on observations from the business and community contacts of each of the Fed’s 12 regional banks through Jan. 6, provide a snapshot of the economy before Trump returns to the White House next week. “More contacts were optimistic about the outlook for 2025 than were pessimistic about it, though contacts in several Districts expressed concerns that changes in immigration and tariff policy could negatively affect the economy,” the U.S. central bank said in its summary of surveys and interviews from across the country known collectively as the Beige Book.”Contacts expected prices to continue to rise in 2025, with some noting the potential for higher tariffs to contribute to price increases.”Concerns were evident even in regions where Trump performed strongly in his Nov. 5 election victory over Democrat Kamala Harris on a platform of hefty tariff increases and stiff restrictions on immigration.”Outlooks continued to improve although there was concern regarding potentially adverse effects of future immigration and trade policies,” the Dallas Fed said.”Food manufacturing and agricultural contacts in Kansas and Nebraska indicated restrictions on temporary migrant labor could lead to significant supply constraints,” the Kansas City Fed reported. “Similarly, leisure and hospitality contacts in Colorado suggested immigration restrictions could exacerbate labor shortages in towns near resort communities. Technology industry contacts expressed additional concerns surrounding the ability to employ overseas technology workers if offshoring policies were to shift.”Manufacturers in the Richmond Fed’s district were already factoring tariffs into higher inflation expectations, the survey showed. “Firms’ expectations for price growth a year from now increased,” the bank said. “Manufacturers expected prices to rise at a faster rate a year from now compared to nonmanufacturers, with several citing tariffs on inputs as a reason for higher expected price growth in the future.”The survey data was collected before the start of the California wildfires.Fed policymakers cut the policy rate by a full percentage point in the final four months of last year to a current range of 4.25%-4.50%. Most project a smaller reduction this year, given slowing progress toward the Fed’s 2% inflation goal in recent months and a strong labor market. Consumer prices rose 2.9% in the 12 months through December, data published on Wednesday showed, the largest rise since July and an acceleration from November’s 2.7% increase. December’s unemployment rate was 4.1%, lower than the prior month.Going forward, uncertainty around how Trump’s planned tariffs, tax cuts and other policies will affect the economy also has Fed policymakers in wait-and-see mode.Financial markets are betting on no policy rate reduction until June at the earliest. More

The consumer price index increased a seasonally adjusted 0.4% on the month, putting the 12-month inflation rate at 2.9%. The annual number was in line with forecasts.
Core CPI annual rate was 3.2%, a notch down from the month before and slightly better than the 3.3% outlook.
Shelter prices, which comprise about one-third of the CPI weighting, rose by 0.3% but were up 4.6% from a year ago, the smallest one-year gain since January 2022.
Stock market futures surged following the release while Treasury yields tumbled.

Prices that consumers pay for a variety of goods and services rose again in December but closed out 2024 with some mildly better news on inflation, particularly on housing.
The consumer price index increased a seasonally adjusted 0.4% on the month, putting the 12-month inflation rate at 2.9%, the Bureau of Labor Statistics reported Wednesday. Economists surveyed by Dow Jones had been looking for respective readings of 0.3% and 2.9%.

However, excluding food and energy, the core CPI annual rate was 3.2%, a notch down from the month before and slightly better than the 3.3% forecast. The core measure rose 0.2% on a monthly basis, also 0.1 percentage point less than expected.
Much of the move higher in the CPI came from a 2.6% gain in energy prices for the month, pushed higher by a 4.4% surge in gasoline. That was responsible for about 40% of the index’s gain, according to the BLS. Food prices also rose, up 0.3% for the month.
On an annual basis, food climbed 2.5% in 2024 while energy nudged down by 0.5%.

Shelter prices, which comprise about one-third of the CPI weighting, rose by 0.3% but were up 4.6% from a year ago, the smallest one-year gain since January 2022. Services prices excluding rents rose 4% from a year ago, the slowest since February 2024.
Stock market futures surged following the release while Treasury yields tumbled.

Though the numbers compared favorably to forecasts, they still show that the Federal Reserve has work to do to reach its 2% inflation target. Headline inflation moved down from its 3.3% rate in 2023, while core was 3.9% a year ago.
“Today’s CPI may help the Fed feel a little more dovish. It won’t change expectations for a pause later this month, but it should curb some of the talk about the Fed potentially raising rates,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “And judging by the market’s initial response, investors appeared to feel a sense of relief after a few months of stickier inflation readings.”
The inflation readings this week – the BLS released its produce price index Tuesday – are expected to keep the Fed on hold when it convenes its policy meeting later this month.
While the market cheered the CPI release, the news was less positive for workers: Inflation-adjusted hourly earnings for the month fell by 0.2%, putting the year-over-year gain at just 1%, the BLS said in a separate release.
Details in the inflation report otherwise were mixed.
Used car and truck prices jumped 1.2% while new vehicle prices also moved higher by 0.5%. Transportation services surged 0.5% and were up 7.3% year over year, while egg prices jumped 3.2%, taking the annual gain to 36.8%. Auto insurance rose 0.4% and was up 11.3% annually.
“The inflation rate is currently grappling with a ‘last mile’ problem, where progress in reducing price pressures has slowed,” said Sung Won Sohn, a professor at Loyola Marymount University and chief economist at SS Economics. “Key drivers of inflation, including gas, food, vehicles, and shelter, remain persistent challenges. However, there are signs of hope that long-term inflationary pressures may continue to ease, aided by moderating trends in critical sectors such as shelter and labor costs.”
The report comes with markets skittish over the state of inflation and the Fed’s potential response. Tariffs and mass deportations that President-elect Donald Trump has promised have increased concerns over inflation.
Job growth in December was much stronger than economists had expected, with the gain of 256,000 further raising concerns that the Fed could stay on hold for an extended period and even contemplate interest rate increases should inflation prove stickier than expected.
The December CPI report, coupled with a relatively soft reading Tuesday on wholesale prices, shows that while inflation is not cooling dramatically, it also isn’t indicating signs of reaccelerating.
A separate report Wednesday from the New York Fed showed manufacturing activity softening but prices paid and received rising substantially.
Futures pricing continued to imply a near certainty that the Fed would stay on hold at its Jan. 28-29 meeting but tilted to nearly 50-50 chance of two rate cuts through the year, assuming quarter percentage point increments, according to CME Group figures. Markets expect the next cut likely will happen in May or June.
The Fed uses the Commerce Department’s personal consumption expenditures price index as its primary forecasting measure for inflation. However, the CPI and PPI measures figure into that calculation.
The two readings likely mean that the core PCE will rise just 0.2% in December, keeping the annual rate at 2.8%, according to Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.

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