The week ahead 10 March 2025 - Trump’s tariffs are delayed again

What to watch out for in the UK economy and property market this week.

The Trump administration last week imposed additional tariffs on Canadian and Mexican imports, then postponed them for another month. This replicates what happened in early February on tariffs for both countries. The delay follows stock market volatility, although the White House rejected suggestions that falling share prices had influenced the decision. The US government has said tariffs on other countries will be announced soon, although the stop-go pattern for Canadian and Mexican tariffs suggest the White House is nervous about the economic consequences of this controversial policy.

Meanwhile in Europe, the German government said it plans to ease state borrowing restrictions in order to spend more on defence and infrastructure. This follows pressure from the White House on other NATO members to spend more on defence. German government bond yields rose in response to the news.

Almost drowned out by the mass of political news last week was the ECB cutting its policy rate by 25 bps and warning the Euro Area economy was facing “huge uncertainty”. This was the sixth reduction for Eurozone interest rates since June 2024. The ECB also cut its forecast for 2025 Eurozone GDP growth.

Turning to the UK, the run-up to the Chancellor’s Spring Statement (which is scheduled for 26th March) has begun, with the media briefings pointing to welfare cuts ahead. Since the Autumn 2024 Budget, the UK economy has seen little growth, resulting in lower-than-expected tax revenues. So, the government needs cost savings. Press reports suggest the cuts will target health-related benefits. It will also be interesting to see whether the Treasury considers following the German government’s example and pushes for defence spending to sit outside the normal fiscal rules on debt.

This week sees the publication of the UK GDP figures, which will form the backdrop for the Chancellor’s Spring Statement later this month. The data covers January and we suspect it will portray a sluggish economy, as the PMI data for that month reported low growth for the services sector, and a contraction for manufacturing industries.

More bad news in the GDP data for manufacturing would highlight the continued dominance of the services sector in the UK economy. However, with so many European countries, including the UK, now increasing defence spending, the long-term prospects of the UK aeronautics, defence and engineering sectors are likely to strengthen in the coming years.

This week’s figures

WEDNESDAY 12 MARCH

US CPI Inflation, y-on-y, February

3.0% previous
3.0% forecast

The US economy has seen good levels of GDP and employment growth at a time when other economies have slowed markedly. As a result, price pressures remain elevated, and we believe the inflation rate was unchanged in February at 3.0%.

THURSDAY 13 MARCH

Euro Area Industrial Production, m-on-m, January

-1.1% previous
0.2% forecast

Following several interest rate cuts, we believe the Eurozone economy may be starting to see some improvement in growth. We are forecasting a modest expansion for industrial output.

FRIDAY 14 MARCH

UK GDP, m-on-m, January

0.4% previous
0.2% forecast

Survey data for January showed the economy was at best seeing marginal growth, so our prediction is for a deceleration in GDP growth in January compared to December.