Business

It’s the inflation, stupid: Why a ‘vibecession’ is hurting Biden – despite an economy which is the envy of Europe

Published

1 year ago

April 16, 2024

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In the circumstances, the numbers could hardly look much better.

A year or two ago, the conventional wisdom was that America was facing a terrific recession.

Instead, according to the latest data from the International Monetary Fund, the US has outperformed pretty much every other major economy in the world (including China).

In its latest World Economic Outlook report – the most closely-watched set of international forecasts – it upgraded the US more than nearly every other major economy.

From a European perspective, there is much to be jealous of about America’s recent performance (most European nations, including the UK, saw the IMF downgrade their growth forecasts).

Yet here’s the puzzle. Despite this comparatively strong economy, despite having seen a lower peak in inflation than most European nations (especially the UK), American consumer confidence remains in the doldrums.

It’s not just Europeans who find this perplexing. So too does the White House.

They pumped cash into the manufacturing sector at the very moment it needed it, via a series of expensive programmes including the CHIPS Act (to bring semiconductor manufacturing back home) and the Inflation Reduction Act (to encourage green technology firms to set up factories in the US).

The idea was that from the depths of the pandemic, America would “build back better” – that Biden would emulate Franklin D Roosevelt and his New Deal of the 1930s.

And most conventional statistics suggest that strategy is bearing fruit. Manufacturing employment is rising; factories are being constructed at the fastest rate in modern history. And gross domestic product – the most comprehensive measure of output – is rising. Unlike in the UK or Germany, there was no recession.

So why, then, is consumer confidence so weak? Why are Biden’s approval ratings – the key polling benchmark for the US leader – lower than pretty much any of his predecessors at this stage in their terms?

Travel around Pennsylvania, as we have done over the past few days, and you encounter all sorts of explanations.

It’s the inflation, stupid

Food banks are getting busier; and while some businesses are beginning to see that federal money trickling down, many of the programmes are still at the approval stage. The money hasn’t arrived yet.

But, above all else, you hear one recurrent answer: it’s the cost of living. It’s food prices, it’s gas prices, it’s rents.

And there’s also a big gap here between life through an economic prism and the life lived on Main Street in places like Bethlehem PA – an old steel town trying to reinvigorate its economy.

Talk to an economist and they’ll remind you that inflation – the rate at which prices are changing over the past year – is finally beginning to drop. But while this is statistically true, it misses a couple of pragmatic realities.

First, prices aren’t going down; they’re just rising a bit less quickly than they were before. The squeeze hasn’t gone away.

Second, while economists often fixate on the change in the consumer price index over the past year (3.5% in March), what the rest of the population notices is the change in prices over a longer period.

Over the past two years prices are up around 9%. Over three years, they’re up 18%.

In other words, the explanation for the “vibecesssion”, as economists have christened it (there’s no formal recession but the vibes feel bad), might actually be exceptionally simple: It’s the inflation, stupid.

In Pennsylvania, perhaps the most critical of all the swing states in the US, the question is whether Donald Trump can capitalise on this disaffection to win over the citizens who abandoned him last time around.

In the meantime, the Biden White House is biding its time, hoping that those New Deal economic textbooks they followed when pumping cash into the economy are really to be trusted.

Business

A pub a day to close this year, industry body warns as it calls for cut to tax burden

Published

1 hour ago

July 10, 2025

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A pub a day to close this year, industry body warns as it calls for cut to tax burden

An industry body has warned that the equivalent of more than one pub a day is set to close across Great Britain this year.

According to the British Beer and Pub Association (BBPA), an estimated 378 venues will shut down across England, Wales and Scotland.

This would amount to more than 5,600 direct job losses, the industry body warns. It has called for a reduction in the cumulative tax and regulatory burden for the hospitality sector – including cutting business rates and beer duty.

The body – representing members that brew 90% of British beer and own more than 20,000 pubs – said such measures would slow the rate at which bars are closing.

BBPA chief executive Emma McClarkin said that while pubs are trading well, “most of the money that goes into the till goes straight back out in bills and taxes”.

“For many, it’s impossible to make a profit, which all too often leads to pubs turning off the lights for the last time,” she said.

“When a pub closes, it puts people out of a job, deprives communities of their heart and soul, and hurts the local economy.”

She urged the government to “proceed with meaningful business rates reform, mitigate these eye-watering new employment and EPR (extended producer responsibility) costs, and cut beer duty”.

“We’re not asking for special treatment, we just want the sector’s rich potential unleashed,” she added.

The government has said it plans to reform the current business rates system, saying in March that an interim report on the measure would be published this summer.

From April, relief on property tax – that came in following the COVID-19 pandemic – was cut from 75% to 40%, leading to higher bills for hospitality, retail and leisure businesses.

The rate of employer National Insurance Contributions also rose from 13.8% to 15% that month, and the wage threshold was lowered from £9,100 to £5,000, under measures announced by Rachel Reeves in the October budget.

Business

Trump fires tariff threats at more nations as EU ‘ready for all scenarios’

Published

13 hours ago

July 9, 2025

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Trump fires tariff threats at more nations as EU 'ready for all scenarios'

Donald Trump has revealed a list of more nations set to face delayed ‘liberation day’ tariffs from 1 August.

He has threatened tariffs of 30% on Algeria, 25% on Brunei, 30% on Iraq, 30% on Libya, 25% on Moldova and 20% on the Philippines. Sri Lanka was later told it faced a 30% duty.

Letters setting out the planned rates – and warning against retaliation – are being sent to the leaders of each country.

Money latest: HMRC issues 600,000 fines to people who owe no tax

They were the latest to be informed of the president‘s plans after Japan and South Korea were among the first 14 nations to be told of the rates they must pay on their general exports to the US from 1 August.

The duties are on top of sectoral tariffs, covering areas such as steel and cars, already in place.

Mr Trump further warned, on Tuesday, that a 50% tariff rate on all copper imports to the US was looming.

He has also threatened a 200% rate on pharmaceuticals and is also expected to take aim at all imports of semiconductors too.

The European Union, America’s largest trading partner in combined trade, services and investment, is expected to get a letter within the next 48 hours unless further progress is made in continuing talks.

The bloc, which Mr Trump has previously claimed was created to “screw” the US, has been in negotiations with US officials for weeks and working to agree a UK-style truce by the end of the month.

The EU has retaliatory tariffs ready to deploy from 14 July but it is widely expected to delay them until such time that any heightened US duties are imposed.

It remains hopeful of a deal in the coming days but European Commission president Ursula von der Leyen told the European Parliament: “We stick to our principles, we defend our interests, we continue to work in good faith, and we get ready for all scenarios.”

While the UK’s so-called deal with Mr Trump is now in force, it remains unclear whether steelmakers will have to pay a 50% tariff rate, deployed by the US against the rest of the world, as some final details on an exemption are yet to be worked out.

The rate is currently 25%.

Business

Nvidia wins race to become first $4trn listed company

Published

16 hours ago

July 9, 2025

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Nvidia wins race to become first trn listed company

Nvidia has become the first stock market-listed company to achieve a value of $4trn.

Its share price rose by more than 2% at the market open on Wall Street to reach the milestone moment.

It was achieved just over a year since Nvidia overcame the $3trn barrier and overtook Apple, in market cap terms, in the process.

The AI-focused chipmaker has been the darling of Wall Street for many years.

Money latest: HMRC issues 600,000 fines to people who owe no tax

The value of its shares has risen by 409,825% since its market debut in 1999.

Its status has been cemented thanks to the rush for AI technology – suffering several wobbles along the way – but nothing significant when you refer to the percentage rise of the past 26 years.

The most recent pressures have come from the emergence of the low-cost chatbot DeepSeek and concerns for global AI demand as a result of Donald Trump’s trade war hitting growth.

Financial markets have been taking a more risk-on approach to the trade war since the delays to “liberation day” tariffs in April.

It’s explained by a market trend that’s become known as the TACO trade: Trump always chickens out.

It has helped US stock markets post new record highs in recent days.

The wave of optimism is down to the fact that the president is yet to follow through with the worst of his threatened tariffs on trading partners.

Corporations are also yet to report big hits to their earnings – a fact that is also propping up demand for shares.

If Mr Trump does go all-out in his trade war, as he has now threatened from 1 August, then that $4trn market value for Nvidia – and wider stock markets – could be short-lived, at least in the short term.

But market analysts believe Nvidia’s value has further to go.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said of its meteoric rise: “Once known for powering video games, NVIDIA has transformed into a foundational player in AI infrastructure.

“Its high-performance chips now drive everything from natural language processing to robotics, making them essential to training and deploying advanced AI models.

“Beyond hardware, its full-stack ecosystem – including software platforms and developer tools – helps companies scale AI quickly and efficiently. This end-to-end approach has positioned Nvidia as a cornerstone in a market where speed, scalability, and efficiency are critical.”

He added: “The key question is where it goes from here, and while it might seem strange for a company that’s just passed the $4trn mark, Nvidia still looks attractive.

“Growth is expected to slow, and it’s likely to lose some market share as competition and custom solutions ramp up. But trading at a relatively modest 32 times expected earnings, and over 50% top-line growth forecast this year, there’s still an attractive opportunity ahead.

“For investors, it remains a compelling way to gain exposure to the AI boom – not just as a participant, but as one of its architects.”