Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The price of gold is set to rise further in 2025, say Wall Street analysts, although the pace of gains is likely to slow after last year’s bumper 27 per cent rally.Gold is expected to climb to about $2,795 per troy ounce by the end of the year, according to the average forecast by banks and refiners surveyed by the Financial Times. That is about 7 per cent above current levels.The yellow metal is expected to continue to benefit from buying by global central banks, which have been diversifying away from the dollar since the US imposed sanctions on Russia following its 2022 full-scale invasion of Ukraine. Interest rate cuts by the US Federal Reserve, concerns about growing US government debt levels under president-elect Donald Trump and conflicts in the Middle East and Ukraine are also forecast to lift prices. Such factors were behind bullion’s biggest annual gain since 2010 last year.“We think central bank interest will be a strong base for the buying next year,” said Henrik Marx, global head of trading at Heraeus Precious Metals, which forecast that gold could touch highs of $2,950 per troy ounce this year.He added that Trump’s second presidential term was also likely to be supportive for gold prices. “Whatever he announces will increase debt, leading to a weaker dollar and increased inflation. That is usually a nice mixture for gold.”The World Gold Council said in a report that this year’s growth would be “positive but much more modest”.The most bullish call among those surveyed is from Goldman Sachs, which expects prices to reach $3,000 by the end of 2025. The bank cites central bank demand and expected rate cuts by the Fed.The most bearish forecasts were from Barclays and Macquarie, which both expect gold to sink to about $2,500 per troy ounce by the end of the year — a roughly 4 per cent drop from current levels.“Our base case into 2025 is for gold to initially face ongoing pressure from US dollar strength, but be supported by improved physical buying and steady official sector demand,” wrote Macquarie analysts in their year-end outlook.Global central banks bought 694 tonnes of gold during the first nine months of 2024. The People’s Bank of China announced in November that it was resuming gold purchases after a six-month hiatus.Falling US interest rates have contributed to gold’s rally in the second half of last year, and the pace of further cuts could be crucial to the outlook for the yellow metal. Gold prices pulled back slightly after the Fed lowered rates in December but indicated that borrowing costs will fall more slowly than previously expected in 2025.Because gold is a non-yielding asset, it typically benefits from lower interest rates, because the opportunity cost of holding it is less.Trump’s election win in November has provided one of the most favourable scenarios for gold, due to the likelihood of elevated US fiscal spending and increased geopolitical uncertainty, said Michael Haigh, head of commodities research at Société Générale.“Momentum is taking back over, combined with geopolitical tensions, which is going to add more fuel to the fire,” said Haigh, who expected gold prices to rise to $2,900 per troy ounce at the end of 2025. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.I first visited the ancient Chinese classical gardens in the little town of Suzhou in 2002. It was a two-hour, standing room only slog by commuter train from Shanghai. When I arrived, the only people wandering among the pavilions were fellow international tourists — locals were too busy working for such frivolity.I returned recently, some 22 years after that first trip. It is unrecognisable. Suzhou is now a city of 7mn people — 25 minutes by bullet train from Shanghai. Admission to the town’s acclaimed museum is by app and tickets are sold to a growing army of Chinese tourists, normally by mid-morning.Everyone knows China has changed, but I wonder how many Western investors comprehend just how much and in what ways. And, if you want to invest successfully there, you need to understand this.China has been a disappointment for investors since Covid. The lockdown was so much more severe there than in the west — its population was not cushioned by furlough payments. Economic recovery has been much slower and the Chinese stock market too easy to shun.Trump’s victory raises the spectre of punitive tariffs on Chinese imports into the US. He repeatedly cited a figure of 60 per cent during the election campaign and in November warned of “an additional 10 per cent tariff, above any additional tariffs” (sic). Trump’s bark may yet prove worse than his bite — as it was when he imposed tariffs on China in early 2018. His nominee as Treasury Secretary, billionaire financier Scott Bessent, has described 60 per cent as a “maximalist” position and said of the president-elect: “My general view is that at the end of the day he’s a free trader. It’s escalate to de-escalate.” It’s worth pointing out that the US share of Chinese exports is down to 14.5 per cent today, compared with 19 per cent in 2017, so it’s not as dependent as it used to be.Arguably more relevant to investors are the recent promises of Chinese government stimulus. Share prices have risen by more than 26 per cent on average in the past couple of months, but they are still cheap by many measures — and could represent an opportunity.  China’s affluent middle class is set to grow by 80mn by 2030 (equivalent to nearly a quarter of the US population as a whole). And this growth will be amplified if the Chinese can be encouraged to change some of their financial habits.One of the big reasons for China’s economic slump was the unwillingness of its people to spend. In the west we save on average around 7 per cent of our income. In China it’s nearer 35 per cent.There is a reason for this. Despite being a nominally communist state, China can be ruthlessly capitalist. There is no national health service and insurance and pension industries are fledgling (though rich in potential). Families need a bigger safety net.Remember too, that this is a country that has only recently become wealthy and has an ageing population. Muscle memory and the handed-down stories of grandparents who barely had enough to get by have a powerful impact on spending habits. Covid reinforced this.The consequence is that whereas about two-thirds of GDP is typically derived from consumer spending globally, in China it is just over one-third.What has driven China’s economic miracle has been infrastructure spending — investment in property and modern roads and speeding trains that have drawn hundreds of millions from rural areas to the country’s fast-growing urban centres (3mn a year to Shanghai alone).The Chinese government knows that the next phase of growth cannot come from infrastructure — it must come, at least partially, from consumption — from supporting the rise of the middle class and encouraging people to spend more. The two in tandem could be powerful drivers of growth.[embedded content]If the government in Beijing succeeds, the winners will not be yesterday’s winners — for a long time the Western companies that jumped in to establish an early presence as the country’s economic revolution gathered steam. With more choice, consumers are becoming more discerning in their purchases, and we are seeing the rise of domestic brands that are often more adept at reading and catering to the consumer mood.South Korea’s Samsung’s recent troubles are in part because Chinese brands such as Huawei, Vivo, OPPO and Xiaomi have virtually pushed it out of the smartphone market in China.The country’s electric car industry, with the benefits of government subsidies, has established a similar grip on the domestic market. BYD produced 1.76mn EVs in 2024, close to Tesla’s 1.79mn — but it also built another 2.49mn hybrids. In four years China has overtaken the US, South Korea, Japan and Germany to become the world’s leading car exporter. Chinese manufacturers on track to become well-known names over here — beyond BYD — include Dongfeng, SAIC (owner of the MG brand), Nio and Xpeng. It is a similar story in fashion and cosmetics: look out for Icicle and Proya. For me, the bigger question investors should ask is not whether the Chinese will spend again, but how. As Beijing continues to take steps to address the fallout from the real estate implosion — which has undoubtedly played a big role in curbing consumer spending in recent years — new market opportunities are arising.One area that has seen rapid growth since Covid is health and fitness. Running has become hugely popular. Beneficiaries include Adidas and the Chinese brand Anta. And then there is tourism — now back at pre-Covid levels and up 32 per cent year on year. Trip.com is already benefiting from this trend.Historically, the safest way to play China’s growth story was to buy Western companies exposed to the Chinese market. Some may say that is still the case — but concerns remain that the state will arbitrarily undermine international businesses seen to cross a line in its eyes.Nevertheless, I believe some of the best opportunities come from spotting the domestic brands that have taken root in China and are growing strongly. Investing in China is not as simple as it was, but from this low valuation point the potential rewards are arguably greater than ever, despite Trump.  Swetha Ramachandran is a global equity manager at ArtemisThis article has been updated since original publication to include the latest BYD and Tesla production figures  More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldDonald Trump’s vision to reshape the world’s largest economy through protectionist policies that put “America First” will damage growth, according to Financial Times economists’ polls that contrast with investors’ bullishness over the US president-elect’s plans. Surveys of more than 220 economists in the US, UK and Eurozone on the economic impact of Trump’s return to the White House showed most respondents believed his protectionist shift would overshadow the benefits of other elements of what the president-elect has dubbed “Maganomics”. Many economists in the US, who were polled jointly by the FT and the University of Chicago’s Booth School of Business, also believe a new Trump term will spur inflation and lead to more caution from the Federal Reserve on cutting interest rates. “Trump’s policies can bring some growth in the short term, but this will be at the expense of a global slowdown which then will come back and hurt the US later on,” said Şebnem Kalemli-Özcan, a professor at Brown University who also sits on the New York Fed’s economic advisory panel. “His policies are also inflationary, both in the US and the rest of the world, hence we will be moving to a stagflationary world.”Some content could not load. Check your internet connection or browser settings.However, most economists — including at the IMF, the OECD and the European Commission — forecast stronger growth in the US than in Europe in 2025. The US economy has consistently outgrown its counterparts across the Atlantic since the coronavirus pandemic, expanding at an annualised rate of 2.8 per cent in the third quarter of last year.Trump has yet to lay out a comprehensive economic policy prospectus, leaving analysts to base their outlooks on pledges and threats made on the campaign trail. Those include plans to impose blanket tariffs of up to 20 per cent on all US imports, mass deportations of undocumented workers, slashing red tape and making tax cuts introduced in 2017 permanent. Trump, a self-described “tariff man”, has a long-standing and deep-rooted belief that the US needs to close its trade deficit and boost homegrown production. “The announced policies include substantial tariffs and deportations of immigrant workers,” said Janice Eberly, a former Obama administration senior US Treasury official now at Northwestern University. “Both tend to be inflationary and likely negative for growth.” Overall, more than half of the 47 economists polled specifically on the US economy expect “some negative impact” from the Trump agenda, and another tenth forecast a “large negative impact”. On the other hand, a fifth of those surveyed expect a positive impact. The gloom among economists contrasts with investors’ optimism over Trump’s second term. The US S&P equity index surged in the weeks following Trump’s win, though it pared some of those gains in December after US rate-setters signalled they would make fewer rate cuts this year than previously anticipated. In its best two-year run this century, the benchmark index ended 2024 up 23.3 per cent, following a similar gain in 2023.Benjamin Bowler, a Bank of America strategist, said this week that Trump’s “laissez-faire economics, tax cuts and deregulation”, coupled with a potential “AI revolution”, meant the rally was likely to continue into 2025.A separate survey by the FT showed that Eurozone economists were even more pessimistic about the impact of Trump policies in their region than those in the US, with 13 per cent of analysts saying they expected a large negative effect and another 72 per cent forecasting some negative repercussions.For the Eurozone the main concern is about manufacturing production, especially in Germany, the region’s biggest economy. Martin Wolburg, senior economist at Generali Investments, highlighted the possibility of the country’s car industry being “especially targeted” by Trump. Trump’s threat of a 60 per cent levy on China “could further challenge European industries,” said Christophe Boucher, chief investment officer at ABN Amro Investment Solutions, as it would raise the prospect of Beijing flooding the region with cheap products. While the UK is seen as better insulated from tariffs, thanks to its large services sector, Alpesh Paleja, lead economist at the CBI, warned that the country would be exposed to the “second-round impact” should tariffs weigh on Eurozone growth. In the UK, more than 56 per cent of almost 100 respondents expected some negative impact, with many speaking of the drag on sentiment from the prevailing climate of uncertainty ahead of Trump’s inauguration on January 20. Just over 10 per cent forecast some positive impact. “The Trump administration will be an ‘unpredictability machine’ which will dissuade business and households from taking long-term decisions with ease,” said Barret Kupelian, chief economist at PwC UK. “This will inevitably have an economic cost.” More

Gross Domestic Product (GDP) rose 4.3% in the fourth quarter from a year earlier, according to advance estimates from the trade ministry, above a median forecast of 3.3% in a Reuters poll of economists. On a quarter-on-quarter seasonally adjusted basis, GDP expanded 0.1% in the October-December period.Maybank economist Chua Hak Bin said: “Singapore is starting the year in a sweet spot, with growth on a high and inflation at below 2%.””Shifting supply chains to Southeast Asia and front-loading of shipments ahead of potential higher U.S. tariffs will continue to drive manufacturing growth in the first half of 2025,” Chua said.The trade ministry said in November it expected growth of 1.0% to 3.0% in 2025.OCBC economist Selena Ling said the cautious forecast was realistic given current external headwinds and “is likely due to Trump 2.0 tariffs and also possibly the fading of front-loading activities”.However, she said growth is unlikely to slow too significantly in 2025. “Assuming tariffs don’t impact Singapore directly, the 1% year-on-year floor should hold. My baseline is still about 2% given higher base”. November’s annual inflation rate of 1.9% was the lowest in almost 3 years, creating room for the central bank to ease monetary policy at its January review, though analysts believe it might wait until later in 2025 to assess the impact of incoming U.S. President Donald Trump’s policies.The Monetary Authority of Singapore held policy steady at its October review as data showed the pace of activity picking up. Its next review is due before the end of the month. More

“This year, conditions surrounding our economy will be more difficult than ever before,” Bank of Korea Governor Rhee Chang-yong said in a New Year’s address. “Monetary policy needs to be operated with flexibility and agility, as political and economic uncertainty is unprecedentedly high,” Rhee said. The pace of interest rate cuts ahead will be flexible, as trade-offs on growth, inflation, foreign exchange and household debt are expected to widen, Rhee added. At its final policy meeting of 2024, the BOK delivered the first back-to-back rate cut since 2009, as policymakers turned wary on trade risks from the incoming U.S. administration of President-elect Donald Trump. Rhee said downside risks to the central bank’s economic growth forecast of 1.9% for this year have risen, citing uncertainty over U.S. trade policy and domestic politics.On the won, which weakened more than 12% in 2024 to record the worst year since 2008, Rhee said volatility could persist for a considerable period of time. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The EU, a political project conceived to remove trade barriers, has been raising tariff walls at its fastest rate in 15 years. But just as fast as the defences are built against cheap Chinese imports, fresh storms blow the bloc off balance again. Donald Trump’s threat to impose levies of up to 60 per cent on Chinese goods would, for instance, put an even higher tariff wall around the US than anything the EU has planned. The effect, if the US president follows through, would be to divert Chinese goods from the US to the EU — forcing Brussels to in turn consider hitting back with even tougher defensive measures.It is an impossible situation for a union that has taken pride in its free-trading instincts. Every barrier it erects can save some domestic jobs but will also reduce the competitiveness of other domestic industries by raising the price of imports.With China now accounting for 30 per cent of global industrial output, the ripple effects will be considerable on EU products ranging from electric vehicles to Italian tomato paste.Vulnerable industries, such as steel and glass fibre makers, complain the EU has not been building trade defences fast enough or high enough to save them. “We are close to a tipping point for many industries,” said Laurent Ruessmann, a partner with RB Legal and trade defence expert.   On the other hand, those who want cheap Chinese inputs to keep their own product prices down, such as paint makers, have lobbied against tariff measures. The EU has put duties on titanium dioxide, a key ingredient, leaving paint makers worried they will have to absorb the cost or lose sales. Simon Evenett, professor of geopolitics and strategy at IMD Business School, said tariffs always ended up costing consumers or other businesses.  “Europe’s dilemma is either to sacrifice jobs downstream by slapping tariffs on Chinese imports or watch EU producers shrink by doing nothing. When it comes to protectionism, someone’s ox always gets gored.”However, Aegis Europe, which represents heavy industries such as steel and chemicals, argued that the EU was sitting on the fence. Trade defence measures cover far less of its EU imports than other trading blocs, according to Aegis. The number of tariffs has grown to their highest level since 2009, with 141 in force in 2023. But rebased against total imports, the US, Australia and Canada have more than 10 times larger protective shields. “Claims that EU manufacturers use trade defence as a protectionist tool do not stand up to scrutiny,” it said in a report. Brussels has responded. In a move asked for by Aegis, it now automatically registers imports when a trade investigation is opened. It can then backdate tariffs if it wishes, deterring stockpiling during the months-long probe to beat the price rises.But even with tariffs in place, China has tended to find ways around them. Since the EU put anti-subsidy duties in 2010 on glass fibre — used in construction, wind turbines and other industries — Chinese producers have doubled their market share. After the tariffs were imposed, imports started surging from Egypt. China’s state-owned Jushi had opened a plant there, and Brussels eventually put tariffs on Egypt too. Ludovic Piraux, chief executive of producer 3B and president of Glass Fibre Europe, said the tariffs were ultimately too low. “Companies operating within a market economy like ours cannot withstand the relentless attacks from Chinese state-subsidised competitors,” he said.The steel industry is feeling the squeeze most — hobbled by weak demand, high energy costs and regulation forcing it to invest to eliminate carbon emissions.Steel production hit its lowest ever level — 128mn tonnes — in 2023, according to Eurofer, the lobby group. Trump put tariffs on the metal in his first term in an effort to protect his voters in the industrial heartland of the US, and could reactivate them within days of his return.Axel Eggert, Eurofer director-general, said: “We have to decide if we want a European steel industry or not.”Carmakers — themselves now partially protected by tariffs from a surge of cheap, allegedly subsidised Chinese electric vehicle imports — needed EU steel, Eggert argued. While they might be tempted by cheaper Chinese offerings to lower their costs, “as soon as we are gone, the Chinese will raise prices”. The EU might be tempted to reopen talks with the US on a “green steel club”, which would allow tariff free trade between members while those outside pay.This was once dismissed by Brussels as incompatible with World Trade Organization rules. But senior EU officials now hint that they could be flexible in interpreting the rules. In this hostile environment, even good students of trade multilateralism may find it impossible to stick to their principles. More

Gaming revenue last year reached 226.8 billion patacas ($28.35 billion), up 23.9% from 2023, according to data published by the Gaming Inspection and Coordination Bureau on Wednesday. That topped the government’s estimate of 216 billion patacas, but trailed the 292.5 billion patacas logged in 2019.Notably, revenue fell 2.0% in December, the only month registering a year-on-year decline in 2024.The drop coincided with tighter security surrounding a three-day visit by Chinese President Xi Jinping to mark a quarter century of Beijing’s rule. Macau returned to Chinese rule on Dec. 20, 1999, governed under the same “one country, two systems” system as nearby Hong Kong.During his trip, Xi urged Macau to have the “courage” to diversify its economy by establishing new industries and better connecting with the mainland’s national developing strategies. That includes increased economic integration with the Greater Bay Area, a region in the Pearl River delta linking cities such as Hong Kong and Guangzhou. To boost its global competitiveness, Xi said Macau should further promote cooperation with Portuguese-speaking countries and actively participate in Beijing’s Belt and Road Initiative, an ambitious infrastructure plan aimed at boosting trade between China and the rest of the world. Macau, a special administrative region of China, is the only place in the country where gambling is legal. Its economy is heavily reliant on casinos, which contributes about 80% of tax revenues.But China’s long-term anti-corruption drive has reined in gambling revenues from the high-roller VIP sector, which were further depressed during the pandemic years when strict travel restrictions sharply curtailed visits from mainland tourists. ($1 = 7.9990 patacas) More

1. Port workers strike: a possible port workers strike on Jan. 15 — stemming from unresolved issues regarding automation in port operations — disrupting supply chains and potentially impacting GDP by approximately $3.1 billion per day.2. Downward revisions to payrolls may force Fed pivot: The upcoming benchmark revisions could reveal a downward adjustment of around 68,000 jobs per month, indicating a slowing job growth rate that may prompt a dovish pivot from the Fed.3. Shake up at the Fed:  The potential resignation of Vice Chair for Supervision Michael Barr could lead to significant changes in leadership, with Governor Michelle Bowman poised to take over his role and Kevin Warsh potentially being appointed as a new governor.4. Broadening out of stock market rally unlikely: despite investor hopes for a broader market rally, concentration within the index may persist, Wolfe Research said. This trend reflects a longer-term pattern where the S&P 500 has outperformed the equal-weight index in seven of the last ten years.5. President-elect Trump may opt for less harsh tariffs: after initial market reactions to tariff headlines, Trump might end his pursuit of significant tariffs. This would defy widespread investor expectations, as many anticipate increased tariffs on Chinese goods and others. More