US Outlook_ The return of the tariff_ Warning shots fired

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the US economy and its outlook, focusing on GDP growth, inflation, and potential tariff impacts. Core Insights and Arguments 1. GDP Growth Projections: Incoming data suggests a deceleration of GDP growth in Q4 to a trend-like 2.0% q/q saar, down from 2.8% q/q saar in Q3, with indications of a downturn in equipment investment [3][28] 2. Inflation Trends: Core PCE price inflation remained firm, with an increase of 0.27% m/m in October, leading to a year-over-year rate of 2.8% [3][12] 3. FOMC Rate Decisions: The November FOMC minutes indicated a preference for gradual rate adjustments, with a potential 25bp cut in December contingent on upcoming job data [4][15] 4. Tariff Threats: President-elect Trump threatened 25% tariffs on Canada and Mexico and 10% on China, linked to foreign policy objectives. The expectation is that the 25% tariff is unlikely to be implemented, while the 10% may serve as a preliminary measure [5][21][22] 5. Consumer Spending and Investment: Consumer spending showed a 3.5% q/q saar increase in Q3, but equipment investment is projected to decline by about 5% q/q saar in Q4 [10][11] 6. Labor Market Outlook: The upcoming payroll report is critical, with expectations of a rebound to +275k job gains in November, following a weak October due to strikes and hurricanes [20][36] Additional Important Insights 1. Trade Deficit: The trade deficit narrowed from $108.7 billion to$99.1 billion, which has implications for spending components, particularly equipment spending [11] 2. Income and Savings Rates: Revisions to gross domestic income (GDI) estimates showed a slowdown, with the saving rate dropping to 4.9% in Q2 and 4.3% in Q3 [10] 3. Inflation Expectations: The threats of tariffs could increase US CPI and PCE inflation by approximately 35-40bp on a year-over-year basis, although various offsets are anticipated [23] 4. Future Tariff Policy: The expectation is that tariff threats will motivate US importers to front-load imports and accumulate inventories, especially in light of a stronger USD [23] 5. Technological Impact on Productivity: There is a mixed outlook on productivity growth, with some optimism regarding investment and technological advances, while others express concerns about the sustainability of post-pandemic efficiency gains [17] This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the current economic landscape and potential future developments.