14 February 2025: Reeves is under fire over her CV and Expenses

Yesterday was the Chancellor’s birthday, and she received a meagre gift with the news that GDP grew by 0.1% in the final quarter of 2024. However, she is still dogged by two issues from her past that refuse to go away.

The first is her continuing contention that she spent “the better part of a decade” at the Bank of England when the truth is she spent five and a half years working at the Central Bank, and for one of those she was studying at the London School of Economics. Her spokesperson said her CV on the professional’s social media site LinkedIn had an “administrative error” that Reeves was unaware of, which has now been changed.

That does not explain the fact that she has referred incorrectly to the length of time she worked under former Governor Mark Carney.

Another issue which is bubbling to the surface concerns her part in an apparent expense scandal during her time in Yorkshire working for HBOS.

Both the Conservative Party and the right-wing media will not let these matters rest, and Reeves is facing pressure to resign despite a ringing endorsement from the Prime Minister.

The growth data published yesterday showed a welcome growth spurt in December, which meant that the economy did not return to recession having contracted in Q3.

While this is welcome news for the Government, there are concerns that as the tax rises that were announced in the budget come into force in April, the economy will suffer again.

Economists are already predicting a slowdown driven by the construction and services sectors were the most significant drivers of growth between October and December. Construction expanded by 0.5%, while services grew by 0.2%.

Reeves told reporters that the government is “taking on the blockers to get Britain building again.” She said that her party would do this by “investing in our roads, rail and energy infrastructure, and removing the barriers that get in the way of businesses who want to expand.”

This is not a time for victory laps, certainly, and the danger of recession hasn’t gone away, but relative to expectations, this is a win for the Chancellor. Concerns of a weak festive period did not happen, and it offers something to build on this year.

The Pound jumped to its highest level since the beginning of the year yesterday as the market had a “glass half full moment. It rallied to a high of 1.2567 and closed at 1.2560.

Next week will see the publication of the January employment report, followed by the latest inflation figures. Both sets of data will interest the Bank of England, even though its latest rate cut came too late to affect the numbers.

Factory gate prices as illustrated by the producer price data which was published yesterday showed that inflation in the wider economy continues to rise.

PPI rose to 3.3% YoY in January, up from 3.3% in December. This shows that it is not just wages that add to the inflation numbers that were published recently. The imposition of tariffs on goods imported from several of America’s largest trading partners is likely to drive this figure higher.

The manufacturing sector is crucial to the American economy as it spurs job creation, supports innovation, and contributes significantly to GDP.

The manufacturing sector also plays a key role in exporting goods and ensuring global competitiveness. The industry faces new opportunities as it fully embraces the potential of artificial intelligence applications that improve efficiency through automation, optimize supply chains, and enhance product quality.

This is according to the Chairman of the House Committee on Energy and Commerce Subcommittee on Commerce, Manufacturing, and Trade.

Meanwhile, President Donald Trump on Thursday rolled out his plan to increase U.S. tariffs to match the tax rates that other countries charge on imports, possibly triggering a broader economic confrontation with allies and rivals alike as he hopes to eliminate any trade imbalances.

“I’ve decided for purposes of fairness that I will charge a reciprocal tariff,” Trump said in the Oval Office at the proclamation signing. “It’s fair to all. No other country can complain.”

Trump has received criticism from several European leaders over his talks with Russian President Vladimir Putin, which have been described as “appeasement”. His Defence Secretary was in Brussels yesterday meeting NATO leaders, and he appeared to be little more than a Trump “mouthpiece”, parroting comments about the USA being taken advantage of while calling for greater increases in defence budgets from NATO members.

Defence and trade are two areas over which the U.S. and EU are likely to lock horns during the first year of Trump’s second term in office.

The Federal Reserve is likely to hold off on rate cuts through the entire first three quarters of the year following “hotter” than expected inflation data. Markets predict that the first possibility of a cut is in September, while two cuts are now out of the question.

The dollar index lost ground again yesterday, falling to a low of 107.04 despite the stronger-than-expected PPI data. It looks set to challenge its short-term support as the market speculates on the President’s next move on trade and its possible repercussions.

The Banque de France predicts that growth will return to the French economy in the first quarter of 2025 after a torrid end to last year driven by political turmoil linked to the rejection of the 2025 Budget.

According to the regulator, the economy is expected to grow by 0.1-0.2% in the first quarter compared to the fourth quarter of 2024. In October-December, the country’s GDP declined by 0.1% q/q.

While the services sector will drive growth in the first quarter of this year, manufacturing is expected to remain flat after contracting in the previous quarter.

At the same time, according to the central bank’s monthly business sentiment survey of 8,500 companies, businesses reported increased uncertainty, citing the turbulent domestic political situation and fears of a potential increase in US tariffs.

The survey also showed that February is likely to see a slowdown in activity, particularly in services, and stabilization in manufacturing, with aircraft construction expected to grow in contrast to chemical and metalworking industries.

Demand in the construction sector, according to companies, is still cautious in both individual and collective housing construction, as well as in terms of public sector orders.

Last December, the Bank of France lowered its GDP growth forecast for 2025 to 0.9% from 1.2% previously expected. The country’s economic growth is expected to recover to 1.3% in 2026 and 2027.

The Central Bank expected inflation to still be below the ECB’s 2% target over the next three years, in particular, to decline to 1.6% in 2025 and accelerate to 1.7% in 2026.

Despite some encouraging data, the 20 countries that use the euro are languishing in stagnation, with recession-plagued Germany weighing heavily on them.

Surprisingly, the only positive aspect is emerging in Portugal, Spain, and Greece.

Just a few years ago, Portugal, Italy, Spain, and Greece were considered the problem children of the European Union, especially within the group of 20 countries that form the Eurozone.

This has fundamentally changed, with Spanish Prime Minister Pedro Sanchez recently emphasizing that the EU's southern periphery could also "contribute solutions to common problems."

More than a decade after the European sovereign debt crisis brought the four countries close to financial collapse, robust growth has returned to the continent's South.

Spain, for example, has become a veritable producer and exporter of renewable energy, especially solar power, helping itself and others amid the energy crisis triggered by Russia's war in Ukraine.

From a broader European perspective, however, the outlook is far from bright. The eurozone economy is stagnating. In the fourth quarter of 2024, growth in the Eurozone remained unchanged compared to the previous quarter.

Overall, only the summer quarter was a trifle brighter, with GDP growing 0.4% over the year.

The expected structural changes to the entire economy cannot be agreed and delivered soon enough, with even the most sceptical ECB officials calling for reform.

The Euro is making ground, but more slowly than its G7 competitors. It rose to a high of 1.0465 yesterday but is still well short of its year’s high. It eventually closed at 1.0461.

Have a great day!