US Retail Sales Surge in March Due to Motor Vehicle Buying Ahead of Tariffs

Forex

Economic

Summary:

U.S. retail sales surged in March as households boosted purchases of motor vehicles ahead of tariffs, though concerns about the economic outlook are hurting discretionary spending.

Retail sales increased 1.4% last month after an unrevised 0.2% rise in February, the Commerce Department's Census Bureau said on Wednesday. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, accelerating 1.3%.

President Donald Trump's 25% global car and truck tariffs came into effect in early April, with industry analysts and manufacturers warning that the duties would significantly raise motor vehicle prices.

Motor vehicle manufacturers reported a big jump in auto sales in March, attributed by some to a rush by buyers "to try and beat the tariffs."

Consumers are also stocking up on other imported goods. Bank credit and debit card data suggest spending continues to be driven by high-income households with low-income consumers struggling. There is less discretionary spending, which is mostly on services, the main engine of the economy.

With the stock market selling off as the import duties stoke fears of inflation and stagnation in economic growth or even a recession, there are concerns high-income households could start retrenching if the values of their investment portfolios continue to shrink.

Consumer sentiment is near three-year lows, with 12-month inflation expectations the highest since 1981. Mass layoffs of public workers as part of an unprecedented campaign by the Trump administration to downsize the federal government are also weighing on morale and could be a potential drag on spending.

"Bank of America card data indicates that 'nice-to-have' discretionary services spending eased in March, while more inflation-driven spending on necessities such as insurance, rent and utilities continues to rise," Bank of America Institute said in a note.

Retail sales excluding automobiles, gasoline, building materials and food services rose 0.4% in March after an upwardly revised 1.3% advance in February. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Economists had forecast core retail sales rising 0.6% after a previously reported 1.0% jump in February.

Despite the strength in core retail sales in the last two months, economists expect consumer spending slowed considerably in the first quarter because of sluggish outlays on services.

Consumer spending, which accounts for more than two-thirds of the economy, grew at a 4.0% annualized rate in the October-December quarter.

Economic growth estimates for the first quarter are mostly below a 0.5% rate. The Atlanta Federal Reserve is currently forecasting GDP contracting at a 0.3% pace after adjusting for imports and exports of gold. The economy grew at a 2.4% pace in the fourth quarter.

Source: Yahoo Finance

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Warren Takunda

Economic

British inflation slowed to its weakest in three months in March and other measures watched by the Bank of England cooled too, but higher bills and employer costs will pressure prices soon against the backdrop of U.S. President Donald Trump's trade war.

Inflation slowed to an annual rate of 2.6% in March from 2.8% in February, below expectations of 2.7% in a BoE forecast and a Reuters poll of economists.

A price drop for computer games and falling fuel prices helped bring down the headline rate although the prices of clothes rose strongly after a surprise fall in February, the Office for National Statistics said.

"This is very much the calm before the storm," former BoE interest rate-setter Michael Saunders said, pointing to April's increases in gas, electricity and water prices, alongside higher taxes on employers, which could push inflation to 3%.

"And we'll start to see the effects on the economy of Storm Donald with the Trump trade wars," Saunders told BBC radio.

He said inflation was now likely to peak below the BoE's most recent forecast of 3.7% in the third quarter this year, but the cost would be a hit to economic growth.

The BoE - which has an inflation target of 2% - said in February it expected inflation to leap to 3.6% in April as regulated tariffs for household utility bills go up.

Since those forecasts were made, Trump's decision to impose sweeping trade tariffs have raised the prospect of a slowdown in the global economy.

Martin Sartorius, principal economist at the Confederation of British Industry, said the higher US tariffs could put both upward and downward pressures on inflation in the UK, but the BoE was likely to cut interest rates next month.

The line chart shows inflation, core inflation and services inflation in Britain from January 2023 to March 2025.

Financial markets put a roughly 86% chance on the BoE cutting its benchmark Bank Rate by a quarter of a percentage point at its next monetary policy announcement on May 8, up from about 80% from before the inflation data.

"Looking ahead, we expect them to continue their 'gradual and careful' approach to reducing borrowing costs amid an uncertain economic environment," Sartorius said.

BoE Deputy Governors Clare Lombardelli and Sarah Breeden and Monetary Policy Committee member Megan Greene have all said it is too early to judge the inflation implications resulting from Trump's moves.

Trade experts have said China is likely to send cheaper exports to Europe after being effectively barred from the U.S. market due to high tariffs on the Asian powerhouse.

Sterling fell by about a fifth of a cent against the US dollar after the figures were published.

Inflation in the euro zone also fell in March to 2.2% and to 2.4% in the U.S.

KEY MEASURES COOL

Wednesday's data showed inflation for UK services - something the BoE considers to be a good guide of price pressures in the economy - slowed to 4.7% from 5.0% in February. The Reuters poll had pointed to a 4.8% increase.

Core headline inflation, which excludes energy, food and tobacco prices, also eased a touch.

However, despite a slowdown in price growth from levels above 11% in 2022, inflation in Britain continues to be a concern for consumers.

Inflation expectations among the public and business have risen, adding to unease among BoE policymakers who are keeping a close eye on other gauges of price pressures in the economy as they assess when to reduce borrowing costs.

Source: Reuters

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Warren Takunda

Economic

The Pound to Euro exchange rate lost altitude in early trade on Wednesday asthe US Dollar unravelled afresh in an apparent response to the latest in the US-China trade conflict, and a proposal in Washington for a tax on foreign holdings of American assets to be imposed on some jurisdictions.

Adding slightly to GBP/EUR’s decline early in the London session was a 20 basis point fall in the rate of inflation, to 2.6%, and a larger as well as more meaningful 30 basis point decline in the rate of services sector inflation, to 4.7%, which is the measure most closely watched by the Bank of England.

However, the decline dates back to President Donald Trump’s statement late on Tuesday suggesting he may force countries to choose between trade relations with the US and trade relations with China, threatening a possible bifurcation of the global economy and financial markets.

“Moreover, underlining that what starts with tariffs and trade spreads to capital and other areas, Congressional Republicans are proposing legislation that would penalise holders of US financial assets for anyone from a country that imposes a “discriminatory” tax,” says Michael Every, a global strategist at Rabobank.

Above: GBP/EUR at 15-minute intervals with ICE US Dollar Index. Click for closer inspection.

In addition, there is reportedly a new proposal in Washington for a 5% annual levy, rising by 5% per year up to a maximum of 20%, on US assets held by countries who maintain digital services taxes, which would apply mainly to the European Union and Canada, according to Every. However, both the UK and Switzerland are among the others who also have similar taxes, perhaps due to Brussels' own penchant for pushing the extraterritorial adoption of its own rules and regulations.

To say the least, the proposals risk prompting a renewed or continued Exodus from Dollar assets similar to that seen in the week to Passover on Friday. The Dollar already fell against all G20 currencies overnight except for the Chinese Renminbi and Indonesian Rupiah even as global equity markets also declined broadly.

“In keeping with the Passover theme, it’s also important to stress we have four kinds of analysts’ takes on what’s going via the questions they ask about it: the Wise (“Why is this happening?”); the Wicked (“What has this got to do with me/my view?”); the Simple (“What?”); and Ones Who Don’t Know How to Ask,” Every says.

“Which analyst are you? To the answer: this market is different from all other markets because in all other markets we assume there is one global economy within which all goods, services, and capital flow, with one single global reserve currency, the US dollar. Now, we might be witnessing an Exodus from it,” he adds. Pound to Euro Rate in Descent as Global Economy, Markets Head for Armageddon_2

Pound to Euro Rate in Descent as Global Economy, Markets Head for Armageddon_2

Above: GBP/EUR at daily intervals with ICE US Dollar Index. Click for closer inspection.

The Dollar unravelled in a broad-based rout last week that took place amid simultaneous declines in all major US equity markets accompanied by periodic bouts of weakness in the Treasury market, and amid what appeared to be frequent interventions from Beijing in support of the Chinese Renminbi.

The asset sales seen over that period clearly and strongly favoured currencies of current account surplus jurisdiction such as the Euro Area, Switzerland and Japan, among others, who are some of the largest foreign holders of US stocks and bonds.

However, without irony, Beijing currently appears to be one of the few things, if not the only thing, keeping the Dollar from falling into a bottomless pit or abyss, as it seeks to maintain a “basically stable” trade-weighted Renminbi, which is positively-correlated with the Dollar.

“The shift in correlations between the dollar, US yields and US equities is startling in recent weeks, with the USD falling despite higher US yields and lower US equities. This may be temporary, but it has happened very rarely in the past so does bear watching,” says Dominic Bunning, head of FX strategy at Nomura.

Above: US Dollar performance relative to G10 currencies for the week to Friday, 11 April.

Source: Poundsterlinglive

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Warren Takunda

Economic

US President Donald Trump has signed an executive order to initiate an investigation into critical minerals, potentially leading to additional tariffs on industrial resources. The move follows recent probes into chip and pharmaceutical imports, signalling a further broadening of the global trade war.

The investigation, under Section 232 of the Trade Expansion Act of 1962, aims to “determine the effects on national security of imports of processed critical minerals and their derivative products,” according to the official document. “Critical minerals, including rare earth elements, in the form of processed minerals are essential raw materials and critical production inputs required for economic and national security.” The same law was previously used by Trump to impose 25% tariffs on steel and aluminium, as well as to launch a probe into copper imports.

Last month, the president signed an executive order to boost domestic production of critical minerals by invoking the Defence Production Act, providing support such as financing and loans to the sector. The measure is widely seen as targeting China, which dominates the global supply chain.

Trump’s strategic approach to leverage US power in the trade war with China

According to the White House, the US relies on imports of 15 critical minerals, 70% of which originate from China. Last Friday, Beijing announced export restrictions on a wide range of critical minerals, such as germanium, gallium, antimony, and magnets, in response to Trump’s sharp tariff hikes.

The US has only one rare earth mine and no domestic smelters, leaving it heavily reliant on China for natural resources, including rare earths and critical minerals—vital components in electric devices, battery-powered vehicles, aircraft, and defence equipment. A TD Economics report reveals that China dominates the global production of more than half of the 50 critical minerals identified by the US government in 2022. It also maintains a near-monopoly in refining, processing 90% of global rare earth elements. To strengthen its hand in the trade war, the US will need to diversify sourcing of these industrial materials.

“Processed critical minerals and their derivative products face significant global supply chain vulnerabilities and market distortions due to reliance on a small number of foreign suppliers,” Tuesday’s investigation document states, “The dependence of the United States on imports and the vulnerability of our supply chains raises the potential for risks to national security, defence readiness, price stability, and economic prosperity and resilience.”

In February, Trump demanded $500 billion (€442 billion) worth of Ukraine’s rare earth and critical minerals as part of peace talks, a move also seen as a strategic effort to enhance the US’s position against China.

Market responses

Australia’s major mining stocks fell during Wednesday’s Asian session, with shares of BHP falling 1.2%, Rio Tinto sliding 2.3%, and Phibara Minerals dropping 2.9% as of 5:52 am CEST. In commodities, iron ore (CFR China) futures on the SGX declined 0.35%, while copper futures fell 0.91%.

The downturn in the resource sector may also be linked to reports that Nvidia is facing new US export restrictions to China, which could cost the tech giant billions of dollars. These fresh regulations are expected to dampen demand for industrial resources such as copper and certain critical minerals used in chip manufacturing. Combined with Trump’s latest probe, the news has contributed to broader market weakness.

European markets may soon feel the ripple effects of the intensifying global trade war, with stock futures pointing to a lower open across major indices.

Source: Euronews

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Warren Takunda

Economic

UK inflation dropped to 2.6% in March, increasing the pressure on Bank of England policymakers to cut interest rates next month as Donald Trump’s tariff wars cast an uncertain outlook.

Prices growth was weak ahead of an expected rise in April as households begin to pay higher council tax and utility bills.

Last month’s reading came in below City forecasts of a fall to 2.7%. It comes after the consumer prices index fell in February to 2.8%, down from 3% in January.

The Office for National Statistics (ONS) said falling fuel prices and slowing increases in the cost of a night out drove inflation lower, although this was offset by price rises for clothing and footwear. The price of food was also a factor in dragging down prices growth after it was flat in March compared with rising prices in the same month last year.

The average price of petrol fell by 1.6p a litre between February and March 2025 to stand at 137.5p a litre, down from 144.8p a litre in March 2024, the ONS said.

Trump’s tariff announcements this month – in which huge levies were imposed on US imports before market turmoil sparked an abrupt U-turn – have clouded the picture for inflation, with the turmoil widely expected to dampen growth. UK Inflation Falls to 2.6%, Increasing Pressure on Bank to Cut Interest Rates_1

UK Inflation Falls to 2.6%, Increasing Pressure on Bank to Cut Interest Rates_1

Ruth Gregory, the deputy chief economist at the consultancy Capital Economics, said inflation was likely to hit 3% in April due to a 6.4% month-on-month rise in utility bills and 26% month-on-month leap in water bills.

She estimated that the peak inflation rate this year would be 3.5%, “but we doubt it will stay there long. We expect the weak economy to prompt an easing in domestic inflation.”

Before Trump’s tariff announcements several analysts had predicted that inflation would start rising from April onwards, peaking at about 4% over the summer before falling back next year.

However, the US president’s trade war has cast doubt on those forecasts for CPI, which could peak at a lower rate if China is allowed to dump goods in Europe that were previously destined for the US.

Gregory said her forecasts were in doubt as Trump’s tariffs begin to harm the global economy and drag down prices across the world. It was possible that inflation would peak at a much lower rate, though the outlook remained uncertain.

With inflation remaining about the Bank of England’s 2% target, financial markets are betting on an 86% probability of an interest rate cut at its 8 May meeting, which would lower the key base rate by a quarter of a percentage point to 4.25%.

One of the Bank’s previous deputy governors, Charlie Bean, said last week that tariff uncertainty meant the Bank should set aside concerns about inflation and cut the cost of borrowing by at least half a per cent, while the former prime minister Gordon Brown has called for a coordinated rate cut by all major central banks.

Wage increases remain stubbornly above inflation despite a slowdown in the jobs market. Earnings, excluding bonuses, rose to 5.9%, from a revised 5.8% in the previous rolling three-month period to the end of January, figures showed on Tuesday. This was slightly below a prediction of 6% from City economists.

Jobs figures showed a weakening labour market as employment in March fell and firms cut back on job adverts.

The chancellor, Rachel Reeves, said: “Inflation falling for two months in a row, wages growing faster than prices and positive growth figures are encouraging signs that our plan for change is working, but there is more to be done.

“I know many families are still struggling with the cost of living and this is an anxious time because of a changing world. That is why the government has boosted pay for 3 million people by increasing the minimum wage, frozen fuel duty and begun rolling out free breakfast clubs in primary schools.”

The shadow chancellor, Mel Stride, said inflation was expected to increase further this year “because of the chancellor’s choices”.He said: “The Conservatives left Labour with inflation bang on target but the chancellor’s reckless union payouts, tax hikes, and borrowing binge is driving up the cost of living.“Be in no doubt, the chancellor’s choices are keeping inflation higher for longer and working families are paying the price.”

Source: Theguardian

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Warren Takunda

Economic

Stocks

World shares were mostly lower Wednesday as Nvidia and other technology companies were walloped by tighter U.S. controls on exports of advanced computer chips used for artificial intelligence.

The future for the S&P 500 skidded 1.2% while that for the Dow Jones Industrial Average lost 0.6%.

Chip maker Nvidia’s shares fell 6.3% in after-hours trading after it said the U.S. had imposed stricter controls on its exports of one of its computer chips designed for use in artificial intelligence. Rival chip maker AMD’s shares dropped 7.1% after U.S. markets closed.

Trade war concerns also were revived by a Trump administration announcement of an investigation into imports of critical minerals such as rare earths, which are used in smart phones, electric vehicles and many other products.

In early European trading, Britain’s FTSE 100 lost 0.2% to 8,233.10 after the government said inflation in the U.K. fell for the second month running in March largely as a result of lower gas prices.

Germany’s DAX fell 0.7% to 21,107.68, while the CAC 40 in Paris gave up 0.6% to 7,289.67.

Stocks in China led the regional declines after the Chinese government reported the world’s second largest economy grew at a strong 5.4% annual rate in the last quarter, helped by strong industrial production, retail sales and exports. But in quarterly terms, growth slowed to 1.2% in January-March from 1.6% in the last quarter of 2024.

Hong Kong’s Hang Seng dropped 2% to 20,922.54, while the Shanghai Composite index regained lost ground, edging 0.1% higher to 3,271.19.

Private sector economists have been downgrading their forecasts after President Donald Trump recently pushed his tariffs on most imports from China to 145%, while China raised its duties on imports from the U.S. to 125%.

Analysts at ANZ Research said activity in the current quarter is already weakening.

“Our view is that the tariff shock is caused by the unpredictability rather than the tariff itself. President Trump’s announcements have affected business sentiment and activity,” Raymond Yeung and other ANZ researchers said in a report after the China data was released.

In Tokyo, the Nikkei 225 index shed 1% to 33,920.40, pulled lower by big tech companies like chip testing equipment maker Advantest, whose shares dropped 6.6% and Disco Corp. which plunged 8%.

South Korea’s Kospi fell 1.2% to 2,447.43, while in Australia, the S&P/ASX 200 edged less than 0.1% lower to 7,758.90.

India’s Sensex was little changed and Bangkok’s SET edged 0.1% lower.

On Tuesday, U.S. stocks drifted, with the S&P 500 slipping 0.2% and the Dow down 0.4%. The Nasdaq composite edged less than 0.1% lower.

Uncertainty over President Donald Trump’s tariffs kept investors watching to see what comes next.

The U.S. bond market appeared to calm after its sudden and sharp moves last week shook confidence in the status of U.S. government bonds as a safe haven against risks.

The yield on the 10-year Treasury was steady at 4.33%, down from 4.38% late Monday and 4.48% at the end of last week. A week earlier it had been at just 4.01%. Yields usually drop when investors are jittery, so this week’s moves have offered reassurance.

The value of the U.S. dollar also steadied after tumbling last week, raising more worries that Trump’s trade war also may be undermining its status as a safe-haven investment.

Palantir Technologies climbed 6.2% for a second day of gains after NATO said it would use the company’s artificial-intelligence capabilities in its allied command operations.

In other dealings early Wednesday, U.S. benchmark crude oil lost 69 cents to $60.64 per barrel, while Brent crude, the international standard, fell 65 cents to $64.01 per barrel.

Trump’s tariffs have raised expectations that economies will slow, denting demand for oil and other resources.

The U.S. dollar fell to 142.26 Japanese yen from 143.24 yen. The euro rose to $1.1377 from $1.1283.

Source: AP

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Michelle

Political

Iran's right to enrich uranium is not negotiable, Foreign Minister Abbas Araqchi said on Wednesday, ahead of a second round of talks in Oman this weekend with the United States about Tehran's disputed nuclear programme.

Araqchi was responding to a comment made on Tuesday by the U.S. top negotiator Steve Witkoff, who said Tehran must "stop and eliminate its nuclear enrichment" to reach a deal with Washington.

"We have heard contradictory statements from Witkoff, but real positions will be made clear at the negotiating table," Araqchi said.

"We are ready to build trust regarding possible concerns over Iran's enrichment (of uranium), but the principle of enrichment is not negotiable."

Iran and the U.S. are due to hold a second round of talks in Oman on Saturday over Tehran's escalating nuclear programme, withPresident Donald Trumpthreatening military action if there is no deal.

Before the talks, Araqchi will deliver a message from Iran's Supreme Leader Ali Khamenei to Russian President Vladimir Putin on a trip to Russia, Iranian state media reported on Wednesday.

The Kremlin on Tuesday declined to comment when asked if Russia was ready to take control of Iran's stocks of enriched uranium as part of a possible future nuclear deal between Iran and the United States.

The Guardian reported that Tehran was expected to reject a U.S. proposal to transfer its stockpile of enriched uranium to a third country such as Russia as part of an agreement that Washington is seeking to scale back Iran's nuclear programme.