There are times when an economist who follows the economic cycle throws his arms up in despair, hoping for help from above. The circus surrounding the American import tariffs took some unexpected turns this week, increasing uncertainty for companies, families, investors and certainly economists. In fact, meticulously reporting on recently published macro figures is a fairly pointless exercise under the current circumstances, but feel free to read on.
Recent German figures paint a mixed picture. Industrial production fell by 1,3% in February compared to January and by around 4,2% compared to a year earlier. The decline of German industry thus continues merrily. The production index peaked in November 2017. In February this year, the index was a shocking 16,7% lower than then. In the five most energy-intensive sectors, production in February was even more than 22% lower than in 2017.
On the positive side, the value of German exports rose by 1,8% in February compared to January. The then only threatening US import duties probably played a role here, because the value of exports to the US rose by no less than 8,5%.
Things are going a little better for us. In February, the industry in our country produced 1,0% more than a year earlier. It was the second consecutive month in which a plus was recorded after a year and a half of minuses. In the course of this year, the production figures will receive a push upwards in terms of growth compared to a year earlier, because production in the 'automotive' sector gradually fell sharply last year. Base effects are therefore at play here. Incidentally, I continue to have my doubts about the following picture. I will delve into it a little more closely.
The Dutch consumer is also increasingly showing itself. Despite low consumer confidence, the volume of household consumption was 2,1% higher in February than a year earlier. That was the best figure in almost two years.
American SMEs lose confidence
According to the SME confidence index, as compiled by the National Federation of Independent Business, the decline continued in March. This NFIB index rebounded strongly in November and December after Donald Trump was re-elected. But apparently SMEs are not so charmed by Trump's policies. The index fell from 110,7 in February to 97,4 in March. That was the third decline in a row and the largest monthly decline since June 2022. Incidentally, the confidence index is still a bit above the pre-election level.
The fact that US inflation fell in March is a positive development. The general price level even fell by 0,1% compared to February, causing the year-on-year inflation to fall from 2,8% in February to 2,4%. If food and energy are excluded, prices rose slightly: +0,1% month-on-month. Compared to a year ago, core inflation fell from 3,1% in February to 2,8% in March.
The lower than expected inflation figures are good news for President Trump and also for the Fed. If the economy ends up in a situation of stagnation or contraction, interest rate cuts are very useful. But high inflation makes it difficult for the Fed to decide to cut rates.
Closing
I'll keep it short today. The uncertainty surrounding the trade war makes the economy even more difficult to predict than usual. I always find looking at recently published figures interesting, but it says less about the immediate future than under normal circumstances.
We can’t look inside Trump’s head and we don’t know why he first announces very high reciprocal import tariffs with great fanfare and then postpones them. I try to find some hope in the idea that people around him have convinced him that the proposed measures are unwise.
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