Supporting consumers

Daily update

The ECB cut rates by 25bps as was expected. The ECB does not want to be running a restrictive monetary policy at the moment, and more rate cuts are expected next year. The ECB’s challenge is that data tends to understate economic activity, so knowing precisely how the economy is faring is difficult.
UK October monthly GDP data was weaker than expected. However, the UK is not able to accurately measure the labor market on a monthly basis at the moment, so the accuracy of monthly measures of something as complex as the entire economy must be doubted.
US import and export price data are due. US President-elect Trump’s threats to tax US consumers of imported goods make the import price measure significant. Tariffs are applied after import prices are measured. If import price trends break, and import prices fall more than normal, then some of the trade taxes will be paid by exporters. If import prices follow existing trends (which may be disinflationary), US consumers pay all the taxes.
China’s Central Economic Work Conference produced positive rhetoric about policy, including “vigorously” lifting consumption (which would raise living standards). There were few details, however. The most likely time for policy change is in response to any US trade taxes.