Is affordability the focus?

Daily update

Over the past two weeks, perceptions of affordability seem to have shaped US administration policy. Tariffs on furniture imports are delayed, and proposed tariffs on Italian pasta imports are cut. Furniture prices moved from deflation in 2023-24 into inflation last year, although consumers are less sensitive to furniture price changes. Pasta is a small share of consumer spending, but a visible price. If perceptions of affordability are shaping policy, investors need to broaden their focus beyond the precise measurement offered by CPI.
Delaying tariffs delays fiscal tightening in the US, with implications for economic growth and (importantly) the fiscal deficit. The weekend’s action in Venezuela also raises fiscal questions. It is not clear how, if at all, the US intends to “run” Venezuela but military adventures carry a fiscal cost. Despite the noise of social media warriors, geopolitical considerations are likely to concern investors less.
UK November consumer credit data is due. UK consumers have been inclined to save a little more of their rising real incomes in 2025, limiting the interest in credit as a growth driver.
The US offers another manufacturing business sentiment opinion poll, for December. This has suggested a continuous decline in manufacturing output throughout the year, getting the rise in US manufacturing output completely wrong.