Economy

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$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

Donald Trump gave LVMH’s billionaire chief executive Bernard Arnault a pumping handshake as they exited the lifts in the gold and marble lobby of Trump Tower in Manhattan.  “One of the great men, Mr Arnault,” said Trump — then president-elect for the first time around — as they wrapped up the January 2017 meeting. “They’re [LVMH] going to do some wonderful things in this country. Jobs. A lot of jobs.” The world’s biggest luxury group obliged. In 2019, Trump attended the opening of Louis Vuitton’s Texan factory, its third on US soil, where he declared that Arnault had “really delivered”, especially as some products would bear “Made in the USA” labels. Eight years on, that relationship may prove an advantage for LVMH as the threat of tariffs looms large. The second Trump administration has threatened to levy across-the-board tariffs of up to 20 per cent on exports from Europe while China risks being much harder hit. Trump attended the opening of Louis Vuitton’s Texan factory, its second on US soil More

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The PCE price index, the Fed’s preferred inflation gauge, showed an increase of just 0.1% from October and a 2.4% annual rate, both below expectations.
Excluding food and energy, core PCE also increased 0.1% monthly and was 2.8% higher from a year ago, with both readings being 0.1 percentage point below the forecast.
Personal income rose 0.3%, short of the 0.4% estimate. Personal expenditures increased 0.4%, one-tenth of a percentage point below the forecast.

Prices barely moved in November but still held higher than the Federal Reserve’s target when looked at from a year ago, according to a Commerce Department measure released Friday.
The personal consumption expenditures price index, the Fed’s preferred inflation gauge, showed an increase of just 0.1% from October. The measure indicated a 2.4% inflation rate on an annual basis, still ahead of the Fed’s 2% goal, but lower than the 2.5% estimate from Dow Jones. The monthly reading also was 0.1 percentage point below the forecast.

Excluding food and energy, core PCE also increased 0.1% monthly and was 2.8% higher from a year ago, with both readings also being 0.1 percentage point below the forecast. Fed officials generally consider the core reading to be a better gauge of long-run inflation trends as it excludes the volatile gas and groceries category.
The annual core inflation reading was the same as in October while the headline rate rose 0.1 percentage point.
The readings reflected little increase in goods prices and a 0.2% rise in services prices. Food and energy prices both posted 0.2% gains as well. On a 12-month basis, goods prices have fallen 0.4%, but services have risen 3.8%. Food prices were up 1.4% while energy fell 4%.
Housing inflation, one of the stickier components of inflation during his economic cycle, showed signs of cooling in November, rising just 0.2%.
Income and spending numbers in the release also were a bit light compared with expectations.

Personal income rose 0.3% after having jumped 0.7% in October, falling short of the 0.4% estimate. On spending, personal expenditures increased 0.4%, one-tenth of a percentage point below the forecast.
The personal saving rate edged lower to 4.4%.
Stock market futures held in negative territory after the report while Treasury yields also slumped.
“Sticky inflation appeared to be a little less stuck this morning,” said Chris Larkin, managing director of trading and investing at E-Trade Morgan Stanley. “The Fed’s preferred inflation gauge came in lower than expected, which may take some of the sting out of the market’s disappointment with the Fed’s interest rate announcement on Wednesday.”
The report comes just two days after the Fed cut its benchmark interest rate another quarter percentage point to a target range of 4.25%-4.5%, the lowest in two years. However, Chair Jerome Powell and his colleagues reduced their expected path in 2025, now penciling in just two reductions compared with four indicated in September.
Though Powell said Wednesday that inflation has “moved much closer” to the Fed’s goal, he said the changes in the projected path for rate cuts reflects “the expectation inflation will be higher” in the year ahead.
“It’s kind of common sense thinking that when the path is uncertain you go a little bit slower,” Powell said. “It’s not unlike driving on a foggy night or walking into a dark room full of furniture. You just slow down.”

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WASHINGTON (Reuters) -Mike Johnson’s hold on the speakership of the U.S. House of Representatives has been tenuous almost since the day he was elected.The Louisiana Republican only ended up with the job in October 2023 after the unruly members of his House caucus deposed then-Speaker Kevin McCarthy and cast about for someone who could amass enough votes to replace him. He won after three other candidates fell short during a tumultuous three-week period that brought the House to a halt.The soft-spoken Johnson, 52, had never served in the higher levels of House leadership before. His decision to move forward with a massive bipartisan spending bill in December to keep the government funded drew intense fire from hard-right members of his party – and most importantly, President-elect Donald Trump.Trump told House Republicans to scrap the first bill on Wednesday and a second version Johnson negotiated on Thursday failed in a vote on the House floor when 38 Republicans rejected Trump’s demand to lift the federal government’s debt ceiling and the measure Johnson had spent a day negotiating. That left Johnson and his allies scrambling to find another way to avoid a Christmas shutdown, something Republican leaders had hoped to prevent given that they take control of both the House and the Senate next month.”With such a narrow majority, he has done good a job and survived longer than expected until this huge miscalculation on the (bill),” said Ron Bonjean, a longtime Republican consultant in Washington. “However, it’s difficult to imagine anyone else being successful in this position with an ungovernable conference and little room to navigate with such a divided House.”Johnson told reporters on Friday that he was plotting next steps, saying “We have a plan.”When the next Congress is sworn in on Jan. 3, Johnson must stand for re-election – and it won’t be easy. His initial majority will be just 219-215, narrower than its current 219-211. Assuming no Democrat votes for Johnson, he will have almost no breathing room with which to work. Already two Republicans, Representatives Paul Gosar and Thomas Massie, have said they won’t back him. Another caucus hardliner, Marjorie Taylor Greene, on Thursday floated the idea of picking a new leader.Johnson’s office did not immediately respond to a request for comment on Thursday, while he huddled with allies to try to plot a course forward.Whether others stick with Johnson will depend on whether he can somehow pull off a new spending bill that contains Republican priorities but omits Democratic ones. That is a formidable high-wire act, given that Democratic votes may be needed to pass the bill in the House and definitely will in the Senate, where Democrats currently hold a 51-49 majority.Thursday’s failed vote sharply increases the odds that parts of the federal government will begin to shut down on Saturday.TIED TO TRUMPJohnson had tried to dodge this scenario by supporting Trump at every turn during his presidential bid and becoming a fixture at his events. Most recently, he met with Trump at Saturday’s Army-Navy college football game even as the funding measure was being hashed out. But for Trump, loyalty has mostly been a one-way street. He will stand by his political allies when it serves his interest, but as McCarthy found out, he is willing to sacrifice them if necessary.McCarthy engendered the wrath of the caucus’ conservatives by striking a budget deal with President Joe Biden in much the same manner that Johnson attempted to do with his funding plan. Both leaders discovered that satisfying both mainstream and hardline Republicans is a nearly impossible task. Following McCarthy’s history-making ouster, several Republicans, including hardline conservative Jim Jordan and more establishment-oriented choices Tom Emmer and Steve Scalise failed to attract enough support to win the speakership. Johnson, a low-profile Christian conservative lawyer from northwest Louisiana who was far down the leadership roster, emerged as a compromise choice. Almost immediately, Johnson’s tenure was embattled. In April, he was forced to rely on Democratic votes to pass a sweeping aid package for Ukraine, a measure opposed by the hardliners in his caucus. Even then there was talk among them of replacing him.Should Johnson somehow survive and serve another term as speaker, it likely will be only due to Trump’s support. And then from that point on, Johnson will owe the new president his political life. More

SINGAPORE/GDANSK (Reuters) -The dollar fell on Friday but hovered near a two-year high and looked set to wrap up its third week of gains, while markets digested a raft of global central bank action and the looming risk of a U.S. government shutdown.The dollar was down 0.30% against a basket of six other currencies at 108.1, but earlier in the day rose to a two-year peak at 108.54.In the background, a government shutdown loomed over the U.S., after a spending bill backed by Trump failed in the House of Representatives on Thursday. Government funding is due to expire at midnight on Friday. If lawmakers fail to extend that deadline, the U.S. government will begin a partial shutdown that would interrupt funding for everything from border enforcement to national parks and cut off paychecks for more than 2 million federal workers.A shutdown would directly reduce GDP growth by around 0.15 percentage point for each week it lasts, according to Goldman Sachs, but growth would rise by the same amount after the shutdown was resolved.The euro also hit a one-month low of $1.03435 on Friday, after U.S. President-elect Donald Trump said the European Union must purchase U.S. oil and gas to make up for its “tremendous deficit” with the world’s largest economy, or face tariffs.The single currency quickly pared losses against the dollar and was last up 0.32% at $1.039. “It’s clear that markets aren’t too bothered about that just yet,” said Michael Brown, strategist at Pepperstone. “I think it’s just an opening salvo in what we all know is going to be a sort of a trade war take-two between the U.S. and Europe.” The yen initially weakened to a five-month low of 157.93 per dollar on Friday, as it continues to remain under pressure from the Bank of Japan’s reluctance to further raise rates.It later recouped some of those losses and last traded 0.5% higher at 156.64 per dollar after top Japanese finance officials said the government is “alarmed” by recent foreign exchange moves and is ready to intervene if speculative moves were deemed excessive.The BOJ kept interest rates unchanged on Thursday and its governor stayed vague on how soon it could push up borrowing costs, just a day after the Federal Reserve pointed to fewer U.S. rate cuts next year.The Swiss franc also strengthened with the dollar down 0.5% at 0.8942 francs. .”The JPY and the CHF are the top performers on the day, suggesting some demand for havens into the weekend,” said Scotiabank (TSX:BNS) analysts in a note. Sterling earlier slipped to a one-month trough of $1.2475 but was last up 0.1% at $1.2519.Bank of England (BoE) policymakers voted 6-3 to keep interest rates on hold on Thursday, a bigger split than economists had predicted, as officials disagreed over how to respond to a slowing economy that remains beset by inflation pressures.DOLLAR DOMINANCE The dollar was set to end the week with a 1% gain against a basket of currencies, underpinned by expectations that U.S. rates will stay higher for longer. Markets are now pricing in fewer than 40 bps of Fed rate cuts for 2025.Focus is now on the release of the core PCE price data – the Fed’s preferred measure of inflation – later on Friday, for further clues on the outlook for the U.S. economy.The Australian and New Zealand dollars were also grappling to stay off two-year lows on Friday, with the Aussie last flat at $0.6236.The kiwi was up 0.12% to $0.5638. Both Antipodean currencies were on track for a weekly fall of about 2%. More

Republican House of Representatives Speaker Mike Johnson was trying to plot a course that could pass both his chamber, with narrow Republican control, and the Democratic-majority Senate, as a midnight Friday (0500 GMT Saturday) funding deadline loomed.”We have a plan,” Johnson told reporters at the Capitol on Friday. “We’re expecting votes this morning.”Conservative Republicans on Thursday rejected Trump’s demand to lift the debt limit, which could add trillions more to the government’s $36 trillion in debt. Trump, who takes office in one month, overnight ratcheted up his rhetoric, calling for a five-year suspension of the U.S. debt ceiling even after members of his party’s right flank balked at an earlier two-year extension. “Congress must get rid of, or extend out to, perhaps, 2029, the ridiculous Debt Ceiling. Without this, we should never make a deal,” Trump wrote in a post on his social media platform shortly after 1 a.m. An earlier bipartisan deal was scuttled after Trump and his ally Elon Musk, the world’s richest person, came out against it on Wednesday. A hastily revised alternative backed by Trump then failed by a vote of 174-235 Thursday night. That revised measure generally would keep the roughly $6.2 trillion federal budget running at its current level through March and provided $100 billion in disaster relief. But it dropped other measures included to appease Democrats, who still control the U.S. Senate and the White House for four more weeks. The White House has said President Joe Biden opposed the reworked bill.Previous fights over the debt ceiling have spooked financial markets, as a U.S. government default would send credit shocks around the world. The limit has been suspended under an agreement that technically expires on Jan. 1, though lawmakers likely would not have had to tackle the issue before the spring. More