Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.UK growth will be weaker than previously expected this year and next, according to the OECD, as chancellor Rachel Reeves struggles to inject momentum into the economy.The Paris-based body on Monday trimmed its UK GDP growth estimate for 2025 to 1.4 per cent, a 0.3 percentage point reduction from its previous calculation, following a disappointing recent economic performance. The OECD added in its interim economic outlook that UK growth will slow to 1.2 per cent in 2026 after cutting its forecast for the year by 0.1 percentage point. The downgrade comes ahead of Reeves’ high stakes Spring Statement on March 26, when official forecasts are expected to show a much weaker GDP outlook.Countries across the world, including the UK, are also braced for mounting pressures from US President Donald Trump’s trade war.The latest OECD forecasts factor in the 25 per cent tariffs imposed by Trump on imports from Canada and Mexico, his 20 percentage point levy increase on China, as well as US taxes on steel and aluminium that affect nations including the UK.The US tariffs will drag on global activity, as well as add to trade costs and raise consumer goods prices, the OECD said. The interim outlook downgraded output predictions for a dozen G20 countries, leaving the UK set to have the second-highest growth in the G7 in 2025 after the US. But Reeves is searching for new sources of growth ahead of her Spring Statement after the UK economy unexpectedly contracted by 0.1 per cent in January, driven by weakness in manufacturing, according to official figures. Growth has largely stalled since May last year.Reeves is set to receive a weaker growth forecast from the UK fiscal watchdog that will compound pressures on the public finances at a time when Britain and other European countries are accelerating efforts to boost defence spending given Trump’s wavering military commitment to the region. The Office for Budget Responsibility is widely expected to say on March 26 that the headroom against Reeves’ key fiscal rule will be wiped out by higher borrowing costs and weaker growth, forcing her to pencil in fresh public spending cuts. The OBR in October predicted UK GDP growth of 2 per cent in 2025 and 1.8 per cent in 2026, but forecasters at the IMF and Bank of England have been less optimistic.OECD chief economist Álvaro Pereira called for action to keep UK borrowing contained, saying: “UK debt is fairly high, so it is time to make sure that the fiscal situation remains under control.” In its interim outlook, the OECD said central banks around the world would need to remain “vigilant” given ongoing inflation pressures.It forecast that UK inflation will decelerate to 2.9 per cent this year and then to 2.3 per cent in 2026, giving the BoE the chance to further cut interest rates.The BoE is widely expected to keep rates unchanged when it meets on Thursday after it trimmed them by a quarter point to 4.5 per cent last month.  The consequences for global inflation from rising trade barriers will depend on the extent of further escalation, the OECD said. “A one-off rise in the relative price of tradeable goods due to tariffs is likely to be accommodated, but a sequence of such changes, or signs that inflation expectations are rising amidst still-tight labour markets would likely require higher policy rates than would otherwise be the case,” it added. Reeves earlier this month acknowledged a tougher UK economic outlook given the worsening global trade hostilities. “I don’t want to see tariffs increased,” Reeves said at an event hosted by Make UK, a lobby group for manufacturers.On Monday she said: “This report shows the world is changing, and increased global headwinds such as trade uncertainty are being felt across the board.“A changing world means Britain must change too, and we are delivering a new era of stability, security and renewal, to protect working people and keep our country safe.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Donald Trump’s trade war is taking a “significant toll” on the global economy, the OECD has warned, as it cut growth forecasts for a dozen G20 countries.Global growth will slow this year and next, from 3.2 per cent last year to 3.1 per cent and 3 per cent in 2025 and 2026 respectively, while inflation will be stickier than previously expected, the Paris-based OECD said in its interim outlook as it urged countries to avoid a “ratcheting up of retaliatory trade barriers”. GDP growth in the US will decelerate from 2.8 per cent last year to 2.2 per cent this year and 1.6 per cent in 2026, the OECD said. Higher trade barriers will contribute to persistent inflation, leading the Federal Reserve to keep interest rates unchanged until the middle of 2026, it predicted. “The message is clearly that trade uncertainty and economic policy uncertainty are having a significant toll,” OECD chief economist Álvaro Pereira told the Financial Times.The analysis — the OECD’s first attempt to quantify the economic drag from the early rounds of Trump’s trade war — suggests that few G20 countries’ growth prospects will remain unscathed, as businesses defer investment because of policy uncertainty and consumers are squeezed by higher goods prices. The biggest growth downgrades are to Canada and Mexico after Trump’s decision to levy 25 per cent tariffs on most imports from the US’s neighbours. Growth predictions for Canada were more than halved to 0.7 per cent this year and next, while Mexico is now forecast to drop into outright recession this year, contracting by 1.3 per cent. “Consumer confidence has come down in quite a few countries — in particular Canada, Mexico, the US and a few others,” said Pereira. A resurgence of inflation or downside surprises to growth could trigger a “rapid repricing” in financial markets, the OECD warned. Growth in the US this year will be 0.2 percentage points slower than the OECD previously expected, and half a point weaker in 2026 than previously forecast. Those predictions would still leave the US as the fastest-growing G7 economy in both years. Instead of decelerating, as previously predicted, inflation will now speed up from 2.5 per cent last year to 2.8 per cent in 2025. Core inflation is now projected to remain above central bank targets in many countries in 2026, including the US, the OECD added.Growth forecasts for the biggest three Eurozone economies have been trimmed, with the currency area predicted to expand by 1 per cent in 2025 and 1.2 per cent in 2026. UK growth forecasts were cut to 1.4 per cent this year and 1.2 per cent in 2026. Despite Trump’s imposition of 20 per cent additional tariffs on China, the OECD lifted the Asian country’s outlook for 2025, with growth tipped to be 4.8 per cent, followed by 4.4 per cent in 2026. By contrast, the growth forecast for Japan was curbed by 0.4 percentage points to 1.1 per cent this year, and India’s growth will be half a point lower than previously predicted at 6.4 per cent. “Governments need to find ways of addressing their concerns together within the global trading system to avoid a significant ratcheting up of retaliatory trade barriers between countries,” the OECD said. “A broad-based further increase in trade restrictions would have significant negative impacts on living standards.”The organisation sketched out a “downside scenario” under which the US further boosts tariffs on all countries by 10 percentage points and equivalent retaliatory actions are imposed on the US. The level of global GDP would be 0.3 per cent lower by the second and third years of the shock, the OECD said, with global inflation rising 0.4 percentage points a year. US consumers would be hit hard, equivalent to a reduction of more than $1,600 in real net disposable incomes per household. Interest rates would have to be increased by as much as a percentage point relative to the OECD’s central forecasts over the first three years, while the US effective exchange rate would rise by 1.7 per cent. The OECD said it saw “significant risks” ahead. “Further fragmentation of the global economy is a key concern,” it added. “Higher and broader increases in trade barriers would hit growth around the world and add to inflation.”Data visualisation by Keith Fray More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldUncertainty about President Donald Trump’s tariffs is complicating the “data-dependent” US Federal Reserve’s efforts to send a clear message about the direction of the economy, economists say.As the Fed prepares to deliver its latest interest rate decision on Wednesday, figures last week showed inflation slowed more than expected in February, bolstering the case to resume cuts later this year amid signs of slowing growth. However, policymakers are also weighing fears that promised trade tariffs could stoke inflation or trigger an economic slowdown — or both.“The promise of future tariffs essentially pushes aside [the Fed’s] goal of data dependency and means they’re going to have to rely more on a forecast framework,” said Joe Brusuelas, chief economist at tax and consulting firm RSM US.Although the US central bank is widely expected to keep interest rates on hold this week, investors will be scrutinising officials’ economic forecasts, which show how they are thinking about interest rate levels for the coming years, as well as chair Jay Powell’s post-meeting statement. The Fed has in recent years insisted that it is “data-dependent” and focuses more on the latest inflation and growth figures rather than modelling the future. This stance became increasingly prominent as the central bank sought to maintain its credibility after failing to forecast surging inflation in 2021 and 2022.Policymakers say a dependence on data helps them to stay flexible. Some economists, however, fear that reliance on backward-looking data will put the central bank on the back foot in an environment of increased political and economic uncertainty, especially as expected tariff-induced price pressures could take some time to filter through to the data.February’s surprisingly cool inflation figures, in particular, will make Fed chair Jay Powell’s messaging “more awkward” because it will “be harder to point exclusively to the data” to justify holding interest rates steady, and even potentially raising future forecasts on Wednesday, said Vincent Reinhart, chief economist at BNY Investments.He added that the latest inflation report was “a rear-view mirror reading” that was too early to capture the impact of Trump’s proposed trade levies. A 10 per cent tariff on Chinese imports only went into effect partway through the month and may not yet have trickled through to consumer prices, while levies on Mexico and Canada were pushed back to April 2.Brusuelas said the Fed was facing “a difficult policy position” because raising tariffs on some of the country’s biggest trading partners could simultaneously increase price pressures and weaken the US jobs market, each of which would support opposing interest rate decisions.Trump’s shifting economic policies may also affect how policymakers weigh different economic indicators, according to Thomas Ryan, North America economist at Capital Economics. He expects to see less focus on the price level — a “backward-looking” metric of inflation — and more emphasis on consumers’ inflation expectations, which have begun to tick up since the start of the year.On Wednesday, Fed officials will also be weighing a disappointing employment report, which showed that the economy created 151,000 new jobs in February, fewer than expected, adding to fears of slowing growth. In a speech last Friday, Powell played down these concerns, insisting that the economy remained “in good shape” despite “elevated levels of uncertainty”. But that uncertainty — the result of multiple U-turns on economic and trade policy — means that the Fed will be left “on the back foot” and “unable to plan or take a strong position”, according to James Knightley, chief international economist at ING. The administration’s dizzying policy changes have already sparked an equity market sell-off and concern from businesses. Major US airlines American, Delta, and Southwest this week warned of a slowdown in demand spurred by consumer uncertainty about the US economic outlook. Wall Street’s benchmark S&P 500 stock index, meanwhile, fell into correction territory last week before inching back.“We know for sure that everybody — businesses, households, and monetary policymakers — hates uncertainty,” said David Wilcox, a former Federal Reserve member of staff who now works at the Peterson Institute for International Economics and Bloomberg Economics.Beyond an “oblique reference” to the challenges of uncertainty, however, Wilcox said that Fed officials would try to avoid making any specific reference to Trump’s economic agenda. “Overwhelmingly, I suspect one of Powell’s key objectives will be to keep his head down and not be perceived as providing any running commentary on administration policy,” he said. More

The US should “fight fire with fire” and impose fees on Chinese-built vessels to fund subsidies for its own shipbuilders, Donald Trump’s new appointment to head America’s maritime regulator has said.“We need to offset the subsidies that China has given their shipbuilding industry, fight fire with fire,” Louis Sola, who was appointed chair of the Federal Maritime Commission (FMC) in January, told the Financial Times. “Where should that money [from fees on Chinese ships] go to? That money should be invested into American shipping.”Sola’s comments follow a recommendation by the US Trade Representative (USTR) to impose measures including fees of up to $1.5mn on Chinese-built ships calling at US ports. The Trump administration is expected to make a final decision on the proposal, made following an investigation begun under former president Joe Biden, after a public hearing in March.As many as 36,595 US port calls in 2024 could have been affected by the USTR measures, which could generate annual fee income as high as $52bn, according to researchers at shipbroker Clarksons.“I don’t want to take their Goliath and tie his legs together,” the FMC chair said. “I’d rather put my own champion out there against him and the only way you can do that is you have to fund them.”The proposal to impose punitive measures on Chinese ships calling at US ports is the latest effort to boost American competitiveness, a key aim for Trump. The US president told a joint session of Congress this month he would create an “Office of Shipbuilding” in the White House along with tax incentives for the industry.“To boost our defence industrial base, we are also going to resurrect the American shipbuilding industry, including commercial shipbuilding and military shipbuilding,” Trump told lawmakers.US shipbuilders are highly unlikely to come close to competing with Chinese rivals in the near future, however, said experts.Louis Sola, Federal Maritime Commission chair, said: ‘We need to offset the subsidies that China has given their shipbuilding industry’ More

Young Americans’ confidence in the apparatus of government has dropped dramatically to one of the lowest levels in any prosperous country, a Financial Times analysis of Gallup data shows. The Gallup polls, conducted by surveying 70,000 people globally over the course of 2023 and 2024, found that less than a third of under-30s in the US trust the government. The proportion of US young people who said they lack freedom to choose what to do with their lives also hit a record high at 31 per cent in 2024 — a level worse than all other rich economies, bar Greece and Italy. “[For younger people in the US] the future seems kind of bleak,” said Julie Ray, managing editor at Gallup. While the Gallup poll does not cover the direct repercussions of US President Donald Trump’s second term, experts believe that rising political polarisation is likely to lead to a sharp drop in trust in future surveys. Connor Brennan, a 25-year-old financial economics PhD student at the University of Chicago, and disillusioned Republican, said he trusted the “big figures” in politics “a little less” now than in the past. “Friends, families these days are more and more torn apart by politics and seeing that (politics) taken as almost entertainment,” Brennan said. “It should be boring . . . it really has become more and more like, you watch the latest episode of the sitcom.”Some content could not load. Check your internet connection or browser settings.The proportion of young people in the US reporting no confidence in the judicial system also hit a record high in 2024, while more than a third of under-30s also do not trust the police. “I would not say I trust the government — a lot of things that have changed quite recently that call the government’s ability to be honest with the American people into question,” said Daniel Quezada, a 22-year-old substitute teacher in Arkansas, adding that he also had a “profound, profound sense of scepticism” regarding the police after being peacefully involved in protests in 2020. Elsewhere in the world, young people in Greece and Italy are among the most dissatisfied with public services and confidence in institutions. Nordic economies, such as Finland, Denmark and Norway, tend to be the best performers.Some 61 per cent of young people in the US also reported having recently experienced stress, the third-highest proportion among advanced economies after Greece and Canada. Daniel Quezada: ‘A lot of things that have changed quite recently that call the government’s ability to be honest with the American people into question’ More

Your browser does not support playing this file but you can still More

This article is an on-site version of our The Week Ahead newsletter. Subscribers can sign up here to get the newsletter delivered every Sunday. Explore all of our newsletters hereHello and welcome to the working week.I’m not sure anyone has ever asked what US President Donald Trump thinks about the Bill Clinton era White House line that “it’s the economy, stupid”. But this week we’re going to get a fair degree of feedback on what the current White House occupant’s trade brinkmanship is doing to the global economy.We start the week with the OECD’s take on events in its Interim Economic Outlook Report, published on Monday. GDP growth will be a key part of the story.Inflation and the battle to tame it will take up much of the week’s agenda, with a clutch of significant central banks deciding what to do with interest rates. The US Federal Reserve is likely to announce a 25 basis point decrease on Wednesday, following last week’s better than expected inflation figure. So good was the news that futures markets are pricing in another rate cut this year with about 85 per cent chance of a third.Some content could not load. Check your internet connection or browser settings.However, the Fed is walking a tightrope as it attempts to reduce inflation without triggering a recession, amid intensifying fears that Trump’s aggressive tariff skirmishes are undermining American economic growth.It’s a different story for the UK. On Thursday, the Bank of England’s Monetary Policy Committee will most likely hold rates at 4.5 per cent at its meeting as signs of a rebound in inflation outweigh the unexpected contraction in GDP in January, recorded last week. The BoE had already cut its economic growth forecast for the first quarter of 2025 to 0.1 per cent, from the 0.4 per cent expected in November. Observers expect the central bank is waiting to see the impact of the rise in employers’ national insurance contributions that are about to come into force. Thursday will also see the publication of UK unemployment figures.The Bank of Japan is expected to raise rates, but most likely not when it makes its latest announcement on Wednesday. The country’s most recent GDP growth figure signalled an economy in fair shape despite the difficult adjustments following the BoJ’s move last year to “normalise” monetary policy and begin a cycle of interest rate rises.The big corporate event of the week will be chipmaker Nvidia’s GTC conference starting on Monday in San Jose, California, nicknamed “AI Woodstock” by a group of Bank of America analysts. Practically everyone in the semiconductor and AI space will be there, including most of the big US tech companies and their Chinese competitors. It is a chance for Nvidia to showcase on the conference floor its vast partner network — a whole economy that has sprung up around the company.The company’s co-founder and chief executive Jensen Huang gives his keynote address on Tuesday morning local time, attracting folks who might not even understand what he’s talking about but just want to see him. Analysts expect Huang to speak about Nvidia’s new Rubin AI chip, a more powerful “ultra” version of the company’s Blackwell chip, which sold about $11bn of units since its launch last year, as well as more on AI and robots, which he made a big deal out of at his keynote at the CES conference in Las Vegas in January.There is a steady flow, rather than a rush, of other economic and corporate news over the coming days. There will no doubt be much discussion about what gets added and removed from the basket of goods to decide the UK inflation figure. The cost of living will be a theme elsewhere with producer price index and consumer price index updates from Germany, Japan and Canada. One item that will continue to hog headlines without a specific agenda this week will be Russia’s war in Ukraine. Looking further ahead, the FT will be holding a subscriber webinar on March 27 from 1-2pm GMT, analysing developments in the war as Ukrainian President Volodymyr Zelenskyy faces mounting pressure, US support wanes and Russian President Vladimir Putin enjoys a freer hand amid the Trump presidency. Register for free to submit your question to the panel. One more thing . . . The International Olympic Committee gathers in Greece this week, picking a new chair on Thursday from a list of seven candidates. But the big question, according to the FT’s Big Read team, is whether the global sporting contest even has a future.What does your more immediate future hold? As ever, email me at [email protected] or, if you are reading this from your inbox, hit reply.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayNvidia GTC AI, a five-day conference, beginsOECD Interim Economic Outlook Report on the near-term prospects for the global economyUK: Make UK/BDO Manufacturing Outlook Survey and Economic Forecasts. Also, the March Rightmove House Index.Results: F&C Investment Trust FY, Marshalls FY, Phoenix Group FYTuesdayBenjamin Smith, chief executive of Air France-KLM, and his counterpart at Air France, Anne Rigail, present the French national carrier’s new La Premiere travel experience in ParisLip-Bu Tan takes up the role of chief executive at US chipmaker IntelCanada: February consumer price index (CPI) inflation rate dataUK: annual update of the CPI basket of goods and services, including owner occupiers’ housing costs weights. Also, UK Finance card spending statisticsResults: Close Brothers HY, Computacenter FY, Continental FY, Eni FY, H&T Group FY, Springer Nature FY, SThree Q1 trading update, Trustpilot FY, Yu Group FYWednesdayBrazil: Banco Central do Brasil interest rate decision announcementJapan: Bank of Japan interest rate announcementUS: Federal Reserve interest rate announcement, plus economic projectionsResults: Essentra FY, General Mills Q3, M&G FY, Prudential FY, Softcat HY, Swatch FY, Tencent Q4ThursdayBank of Canada governor Tiff Macklem gives a speech at the Calgary Economic Development eventAustralia: February labour force figures, including the unemployment rateChina: People’s Loan Rate announcementEU: European Central Bank Economic BulletinGermany: February producer price index (PPI) inflation rate figures for industrial productsJapan: Vernal Equinox Day. Financial markets closedUK: Bank of England’s interest rate decision, released alongside the minutes from the Monetary Policy Committee’s meeting. Also, March labour market figuresResults: Accenture Q2, Bloomsbury Publishing trading update, CK Hutchison Holdings FY, Darden Restaurants Q3, FedEx Q3, Investec pre-close trading update, James Fisher & Sons FY, Lloyd’s of London FY, Micron Technology Q2, Nike Q3, RTL FY, RWE FY, Wickes FYFridayGermany: February PPI inflation rate data for servicesJapan: February CPI inflation rate figuresUK: February public sector finances dataResults: Carnival Q1, JD Wetherspoon HYWorld eventsFinally, here is a rundown of other events and milestones this week. MondaySt Patrick’s Day, commemorated at events around the world on the feast day of the patron saint of IrelandIndia: The Raisina Dialogue, a three-day annual conference on geopolitics and geoeconomics, bringing together leaders from politics, business and the media, begins in New DelhiUK: National Audit Office publishes a report on the Home Office’s approach to managing the skilled worker immigration route, following reports of changes to the programme creating a shift in hiringUS: World Bank Global Digital Summit begins in Washington, running until Thursday. This year’s theme is Digital Pathways for AllTuesday60th anniversary of USSR cosmonaut Alexei Leonov becoming the first man to walk in space, floating outside his Voskhod 2 capsule for more than 10 minutesBelgium: European Commission President Ursula von der Leyen meets World Trade Organization director-general Ngozi Okonjo-Iweala in BrusselsWednesdayGreece: 144th International Olympic Committee Session begins at the Romanos Resort in Costa Navarino. The three-day meeting will include the election (on Thursday) of the new IOC president, selected from Britain’s Lord Sebastian Coe, Prince Faisal bin Hussein of Jordan, France’s David Lappartient, Sweden’s Johan Eliasch, Juan Antonio Samaranch of Spain, Zimbabwe’s Kirsty Coventry and Morinari Watanabe of JapanThursdayVernal Equinox, the first day of spring in the northern hemisphere, when the day’s length equals that of the night and the Earth’s poles are the same distance from the SunBelgium: European Council meeting of EU heads of state and government in Brussels, chaired by the European Council President António CostaChina: Beijing imposes retaliatory tariffs on more than $2.6bn worth of Canadian agricultural and food products after Canada imposed 100 per cent tariff on Chinese electric vehicles, and 25 per cent on steel and aluminium last OctoberIran: Nowruz new year celebrationsUS: 2025 National Cherry Blossom Festival kicks off in Washington, continuing until April 13. Peak bloom for the American capital is due later in the monthFridayChina: 2025 World Athletics Indoor Championships begin in Nanjing, finishing on SundayNamibia: Netumbo Nandi-Ndaitwah, the nation’s first female president, is sworn into office on the country’s 35th Independence DayUK: Liberal Democrat party Spring Conference begins in Harrogate. Lib Dem leader Sir Ed Davey will address delegates on Sunday, the last day of the eventSaturdayWorld Wildlife Fund for Nature’s Earth Hour rolls across the globe with famous landmarks, skylines, businesses and homes switching their lights off for one hour at 8:30pm local time to focus attention on climate change. You can calculate your carbon impact with the WWF’s footprint calculatorEgypt: 80th anniversary of the formation of the League of Arab States in CairoUK: Scottish National party conference is held in PerthSundayChina: China Development Forum, an annual meeting of international business and academic groups with China’s top decision makers, economic planners and leading academicsPakistan: Republic Day is commemorated with a military parade, a display of nuclear-capable weapons, tanks, jets, drones and other weapons systemsUK: fifth anniversary of the then prime minister Boris Johnson announcing a nationwide lockdown to prevent the spread of Covid-19Recommended newsletters for youWhite House Watch — What Trump’s second term means for Washington, business and the world. Sign up hereFT Opinion — Insights and judgments from top commentators. Sign up here More

Stay informed with free updatesSimply sign up to the More