February 1-7, 2025
Big news. Actually, there are two pieces of news. The first is Trump’s introduction of tariffs against Mexico and Canada, as well as China. Everything is clear with China, there has been a trade war there for a long time, and the introduction of tariffs against the first two countries has been postponed. For now, for a month. However, Trump has promised to increase tariffs for many countries, including the EU. But this is not the main thing, but the fact that the change was introduced as an instrument in the political life of the world. Or, in other words, that the WTO as one of the elements of the Bretton Woods system is limiting its existence.
In fact, this happened three years earlier, when sanctions against Russia were introduced. But then it could be said that for everyone else, all WTO rules continue to apply (although it became clear to everyone that any other country could take Russia’s place). But after Trump’s decision, taken a few days ago, everything became absolutely clear. And now the question of the fate of the rest of the Bretton Woods institutions is determined solely by the word “When?”
And the second news is the length of the work week in January. Which fell to 34.1 hours. Without taking into account the Covid slump (which, however, is only 0.1 hours away), this is a 15-year minimum:
Рис. 1
It should be noted that the December figures were also lowered retroactively (see the review from a month ago https://fondmx.pro/en/weekly-wrap/ready-to-go-up/ ), which indicates that the downward trend in this figure was already formed last year.
The average duration of the workweek is a very conservative and, most importantly, systemic indicator, and its steady decline indicates that things are very bad in the real sector of the American economy. Of course, theoretically, one can assume a poor seasonal cleanup due to numerous holidays, although the overall result is too great. But in any case, at the beginning of March everything will become completely clear, although, taking into account other data, including those given in the next section of the Review, the picture is quite transparent.
In general, it is clear why Trump was so dismissive of the WTO – apparently, the entire Breton Woods system with all its institutions does not have much time left.
Macroeconomics. Industrial production in Germany -3.1% per year, 19th consecutive monthly minus:
Рис. 2
Germany’s production capacity utilisation at 76.3%, 15-year low (excluding Covid):
Рис. 3
It’s no surprise that the picture is so complicated ahead of the elections in two weeks.
Canada’s PMI (47.1) is the worst in 10 years (excluding the 2020 collapse):
Рис. 4
As we noted in the previous review (https://fondmx.pro/en/weekly-wrap/trump-continues-to-rock/ ), the US foreign trade deficit in goods is at a record high:
Рис. 5
And the overall balance (including services) almost repeated the worst value in history in March 2022:
Рис. 6
When this is combined with the data on the length of the workweek and recent data on industrial prices ( https://fondmx.pro/en/weekly-wrap/the-same-once-again/ ), the picture is clear: a serious downturn in the American economy.
Annual inflation expectations in the US jumped sharply (4.3% vs. 3.3% a month earlier):
Рис. 7
And 5-year (3.3%) updated the 17-year maximum; another +0.1% and it will be a 30-year:
Рис. 8
Brazil’s PPI (Industrial Price Index) +9.4% per year, the highest in more than 2 years:
Рис. 9
House prices in Norway +7.3% per year, excluding the Covid surge, this is an 8-year high:
Рис. 10
Average salary in Japan +4.8% per year, peak in 28 years:
Рис. 11
US job openings fall back to pre-Covid levels:
Рис. 12
New Zealand’s unemployment rate has surpassed its Covid peak and is just 1% off its 31-year high set in 2012:
Рис. 13
The Bank of England cut the rate by 0.25% to 4.50%, promising further easing of policy. The Central Bank of Mexico cut the rate by 0.5% to 9.5%, also hinting at continuation. The Central Bank of India also reduced the rate, by 0.25% to 6.25%.
Main conclusions. Trump, of course, continues to light up, as we noted in the previous review, but, as follows from objective data, he has nowhere to go. Both industry and the US service sector are clearly sagging. The standard of living is still supported by imports, but where do American households get the money? The problems here cannot be solved by cutting Musk’s budget spending alone, and it is impossible to continue issuing.
Including because, apparently, the trend towards rising prices has been restored in the world. We have already given various data on the US markets, here is another one, the cost of chicken eggs, which has doubled since the beginning of the year, setting a record:
Рис. 14
And the US will not be able to hold back the growth of import prices, since everyone wants to compensate for the economic downturn at the expense of the world hegemon.
In other words, either a refusal of hegemony, or an increase in inflation and a rapid decline in the real sector of the economy. And which option Trump will choose (or rather, those American elites who stand behind him) is a big question. We remind you that on February 22, the traditional annual conference of the Khazin Foundation will be held, at which we will talk in detail about what businesses can do in the current situation. And we invite all readers to take part in it: https://fondmx-forum.ru . For our subscribers, the link is 15% with the promo code FONDMX15 .
And we, in conclusion, wish our readers a pleasant weekend and a creative work week!