Global data retail 2016 election briefing

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Election 2016 briefing
GLOBALDATA RETAIL
10 November 2016, Version 1.0

GlobalData: Election 2016 consequences
10November 2016,Version 1.0
02
Contents
Produced by GlobalData Retail
This white paper is produced and published by
GlobalData Retail. Unless otherwise stated, all
content is derived from GlobalData.
Copyright notice
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otherwise, without the prior permission of the
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are believed to be correct at the time of
publication but cannot be guaranteed. Please
note that the findings, conclusions and
recommendations that GlobalData delivers
will be based on information gathered in good
faith from both primary and secondary
sources, whose accuracy we are not always in
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can accept no liability whatever for actions
taken based on any information that may
subsequently prove to be incorrect.
441 Lexington Avenue,New York, NY 10017
Phone: +1 718.708.1476
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Twitter: @GD_retail
02 Summary
06 US consumer views
11 US policy implications
16 The UK view
18 Further information
Page

04
Introduction
Not for the first time in his life, Donald Trump has stunned the nation and the
world. His largely unexpected victory heralds political change of a kind that
only comes once in a generation. Such change, by its nature, breeds
uncertainty. Today people across America, and beyond her shores, will be
asking one question: what does this mean for me?
In answering this query, business musttake an objective view – separating the
heat and and hyperbole of the campaign, and its immediate aftermath, from
the realities that are likely to confront them.
In this paper we outline some of the impacts President-elect Trump and his
administration are likely to have on retail over the short and medium term.

The quick view
Key points from the research
05
Summary
• The public is split on the economic impact a Trump presidency will have;however, most
consumers share the view that notmuch will change over the the remainder of this year.
• It seems thatthe election will have very little impact on holiday spending plans; as such,
our holiday forecasts remain unchanged.
• Longer term there is a polarization of views on whether the Trump administration will
make households worse or better off; on balance, there is a slight bias towards those who
view their finances becoming more favorable.
• The policy implications are mixed. Itappears that retail demand may be bolstered by tax
changes, but retail costs may rise as a consequence of a more restrictive trade policy.
• The good news for retailers is that while the Trump victory has polarized opinions, it does
not seem to have impacted on holiday spending plans. This is logical inasmuch as no policy
changes will take place over the remainder of this year, so there will be no immediate
impact on household finances or the economy in general. As a consequence of this we have
no reason to adjust our existing holiday forecasts.
• Longer term views for household finances have shifted as a consequence of the election.
The number of consumers who feel more positive has the slight edge over those who are
less optimistic, but the majority is a slim one. In any case, the results clearly show a that
many consumers expect some form of change.
• In policy terms, we have confined our attentions to three specific areas: trade, labor, and tax
and regulation. Each of these is reasonably well formulated and we believe that they will be
the main and immediate points of impact on retail.
• Generally, the policy outlook for retailers is mixed with tax policies being favorable but
trade policies looking more problematic. This leads us to believe that over the medium term
retail will find domestic demand slightly stronger, but will also face higher costs from a less
favorable trade and labor policy. While some costs may be passed on, it is likely some will
be absorbed. This raises the prospects of lower margins, although these will be tempered by
a much more favorable tax regime.
• All of this noted, with consumers still digesting the consequence of a Trump win and with
the possibility of the President-elect solidifying and clarifying some of his initial policy
ideas, the situation could well change in the coming weeks. We shall update accordingly if
circumstances necessitate it.

07
Economic views
How people think the resultwillimpact the economy
• Just like the vote itself, the country is divided on the impact a Trump presidency will
have on the economy. The positive and negative sides virtually cancel each other out,
although there is a slight bias in favor of those with less favorable views.
• Regardless of views, the results suggest that most consumers are expecting a Trump
administration to bring about some form of economic change.
How will a Trump presidency affectthe economy?
Consumer views
Graph shows percentage of consumers giving each response
Source: GlobalData consumer research
6.5
14.6
19.4
16.2
13.2
20.7
9.4
Very positive Positive Slightly postive Neutral Slightly negative Negative Very negative
40.5%
Total positive
43.3%
Total negative

08
Economic timing
When people think the impact will occur
• Those who expectsome sort of economic impact generally see it as playing out over the
medium term. Only 15% think the change will come this year, which is to be expected
given that President-elect Trump will not take office until January of nextyear.
• Potentially this is good news for holiday spending as it signals that most consumers
anticipate a steady state economy over the nexttwo months. However, a majority of
consumers feel that change will come early in a Trump presidency, impacting at some
point nextyear.
When will we see this impact?
Consumer views
Right
now
9.8%
Before theend of
this year
4.6%
Immediatelyafter
inauguration
20.1%
Within year1of
presidency
32.7%
Within year2of
presidency
27.5%
Within year3of
presidency
2.7%
Beyond
this
2.6%

09
Holiday spending
How consumers willchange theirplans
• While the electoral outcome has been disappointing for around half the country and
has caused uncertainty among many consumers, the vast majority of shoppers say that
it will make no difference to their planned holiday spending.
• There are some slight shifts in plans, however, on balance these cancel each other out.
As such, we do notanticipate, and are not making,any major adjustments to the
holiday spending forecasts we issued last month.
How will the election result changeyour planned holiday spending thisyear?
Consumer views
0.9 3.7 4.2
80.9
6.9
2.3 1.1
Spend a lot more Spend more Spend a bit more Spend the same Spend a bit less Spend less Spend a lot less
8.8%
Total more
10.3%
Total less

10
Householdfinances
Medium and long term expectations
How do you expectyour household financesto change….
…over the next year?
Chart shows the percentage of consumers giving each response
Source: GlobalData consumer survey
7.9
16.5
55.6
14.5
6.5
Before election
result %
Change,
% point
Much worse 7.5 +0.4
Worse 15.9 +0.6
About the same 58.4 -2.8
Better 12.3 +2.2
Much better 5.9 +0.6
...over the next two years?
Chart shows the percentage of consumers giving each response
Source: GlobalData consumer survey
8.1
16.2
50.3
16.5
8.9
Before election
result %
Change,
% point
Much worse 7.4 +0.7
Worse 14.6 +1.6
About the same 57.5 -7.2
Better 14.2 +2.3
Much better 6.3 +2.6
• Although shortterm views are fairly static, the longer term picture is more fluid. One
of the interesting points here is that more households now expect their finances to
improve over the medium and longer terms than was the case before the election. The
uplifts appear to come from lower to middle income families.
• There has also been an increase in those who think their finances will worsen,
although this is more moderate than those who think things will improve.

US policy implications
Section 3

12
Summary of policy impacts
Trade, labor, and tax and regulation
• While the implications of policy are far-reaching, we have confined our attentions to
three specific areas: trade, labor, and tax and regulation. Each of these is reasonably
well formulated and we believe that they will be the main and immediate points of
impact on retail.
• Generally, the outlook for retailers is mixed with tax policies being favorable but trade
policies looking more problematic.
Points of policy impact
Trump administrationlikely plans
Summary shows our views on the main impacts
Source: GlobalData analysis
Taxation and regulation
Trade
Labor
Generally bad for retail as global trade will be more complex with more barriers
and higher costs. Some better newson IP protection. An areaofimmediate focus
for the Trump administration, but change will take time to deliver.
Moderately bad for retail with labor costslikely to increase somewhat over the
medium term. Indirect cost impact from other sectorslike agriculture. However,
costs will be offset by savings from other policies.
The most positive area for retailers with direct benefitsfrom lower corporate
taxation and the potentialrepealof burdenssuch as overtime legislation. A boost
to retail spending from lower personal taxation for most Americans.

13
Trade
Policy implications and impacts
As a candidate, Donald Trump’s statements on trade were strident with threats to impose
tariffs or import bans on products from China and elsewhere in a bid to protect American
jobs. In reality, the official policy position was always somewhat more moderate – but
there are, nonetheless,some serious shifts that will come into play. These will likely be an
early focus for the Trump administration, notleast because trade policy is largely –
although not wholly – under the purview of the President.
Policy area Implications and impacts
America will withdraw from
the Trans-Pacific
Partnership deal
• As the agreement has not yet been ratified, the impacts on retailers will be minimal. However,
US withdrawal will come as a disappointment for both retailers importing from the Pacific
region and those looking to expandand export into member countries.
• Retailers looking to rely on TPP to guarantee intellectual and brandproperty rights will now
not be able to do so, and will need to look to local IP protection.
Getting tougher on Chinese
subsidies
• While the US is unlikely to take direct and unilateral action over China it will bring cases before
the WTO to try and prevent Chinese manufacturing subsidies. The case will likely be protracted
but, ultimately, it could result in higher pricesfor products like apparel and electronics made in
the country.
China and intellectual
property rights
• The US is likely to get tougher on China’s infringement on the IP rights ofUS firms. While this is
more applicable to areas like pharmaceuticals and technology, it may bring some comfort to US
retailers who feel their brands or designsare at risk from infringement.
The NAFTA
renegotiation
• This could ultimately see more barriers and tariffs erected betweenCanada, Mexico and the
US. While it may protect American jobs, it wouldalso likely increase prices for USconsumers.
• If negotiations fail, the US could withdraw fromNAFTA which wouldhave serious implications
for retail supply chains. However, Congress would need to be involved in such decision.
The United Kingdom and
the EU
• President-elect Trump’s thinking is not completely clear inthis area. However, he is likely to be
suspicious of the TTIP trade deal with the EU and may endUS involvement entirely. Given the
deal is not in yet place the impact would be minimal.
• A trade deal with the UK is more likely, thoughthis wouldtake time to ratify as the UK would
need to leave the EU first.

14
Labor
President-elect Trump’s position on labor has two main dimensions. First, his views that
immigration should be more tightly controlled to preventAmerican jobs from going to
foreign workers and to preventwage erosion resulting from the use of low-income illegal
immigrants. Second, his promise to create 25 million more American jobs over the next
decade. Detail surrounding the jobs promise is thin on the ground, though it looks to be
based on the assumption of higher economic growth.
Illegal immigration and low
cost labor
• The proposed crack down on illegal immigrants could well drive up labor costs in some parts of
the economy. Most retailers are unlikely to be affected, but sectorslike agriculture could feel
the impact and push up prices.
• There may be a shortage of unskilled labor in some parts of the country, driving upwages.
Skilled labor and visa
issuance
• While there will be greater scrutiny over visa issuance,skilled workers are unlikely to be
affected as the visa processes in place are already robust. Skilled employeeswouldalso be seen
by the President-elect as those who add value to the economy, which he has said previously are
not a focus of his clampdown.
The minimum
wage
• President-elect Trump’s policy on the federal minimum wage is not entirely clear.However,if
anything he is likely to err on the side of a slight increase to around $10 an hour to support
workers.
• He has previously suggestedthat minimum wage decisions should be made by states; he won’t
repeal federal legislation but could opt out of mandating future increases at the federal level.
Job creation
efforts
• There is a shortage of detail on how a Trumpadministration would generate new jobs,but a
focus on reducing business burdensis likely to underpin the plan . There may also be incentives
for firms creating new jobsin certain areas.
Labor costs
• Given the current tightness ofthe labor market, President-elect Trump’spolicies are likely to
increase direct labor costs over the medium term.However,these costs would be offset by
reductions elsewhere in business suchas lower taxes.

15
Taxation and regulation
Taxation is one of the more fully formulated policy areas. The generaldirection is clear
inasmuch as it involves lower taxes for workers and for businesses and a simplification of
the tax system, though not to a radical degree. Delivering on the tax promises is
problematic only in that, to pay for themselves,they rely on high rates of economic
growth – growth that may initially prove elusive due to the continued softness of the
global economy.
Low income
taxation
• The good news for low income consumers is that the effective tax rate will be zero if President-
elect Trump’s plans are enacted. This will help to boost spending in retail, thoughonly to a small
degree.
• On a sector level the main beneficiaries are likely to be grocery, apparel and casual dining.
Personal taxation levels and
brackets
• Personal income tax brackets are likely to be simplified with 3 effective levelsof taxation, down
from the current 7. The standard deduction would also increase significantly, though personal
exceptions would be scrapped.
• Most income groups would be better off with those earning $50-80k saving $1,000 a year.
However, larger families couldtake a hit because ofthe end to personal exceptions.
General corporate
taxation
• The aim is to bring corporate taxation down to 15% from the current 35% rate.However,most
business deductions would be eliminated. Ultimately this will benefit larger retailers, allowing
them to keep a bigger slice of profits. It could also attract more foreignretailersto the US.
• Retailers with overseas cash piles could repatriate it to the US at a 10% tax rate.
Estate tax repeal
• Estate taxes would be repealedunder the Trump tax plan. Given that fewer than 1% of estates
currently pay the tax, the impact for retail will be limited. All the more so as those affected are
likely to be wealthy and will, therefore, probably invest their windfalls rather than spendit on
retail products.
Overtime regulation and
costs
• As of December 1st
, legislation will require that workers with salariesunder $47,476 get paid
overtime wages when they work more than 40 hoursin a week. This will affect many retailers.
• Under Clinton this rule would have beenkept and extended. Althoughhe has not committed to
repeal, its future under Trump looks far more uncertain.

Implications for the UK
Summary of effects
• While the Trump administration will not directly affect UK retailers, its policies will
nonetheless have an impact. The good news is that not all of these are negative.
• Those with operations within the US will, over the medium term, find burdens on
their businesses reduced. Corporation tax will come down, healthcare costs will be
slashed, and red-tape is likely to be cut – especially for those firms looking to grow and
create jobs for Americans. In short, the business environmentwill become friendlier
and more conducive to growth.
• Those not presentin the US may also benefit. Unlike his predecessor, President Trump
is highly likely to prioritize some sort of trade dealwith the UK. While the terms of
this agreementare open to speculation, and while the timing will be protracted as
ratification can only come with the UK’s exit from the EU, it will inevitably mean that
trade between the UK and US will become easier and stronger. This is something UK
retailers can take advantage of.
• In the short term, uncertainty in the US will ease some pressure on the pound as the
dollar sinks. This is unlikely to undoall of the depreciation sterling has seen over
recent months,but it will take the edge off the decline and may stop further
inflationary pressures.
• The positives, however, will be counterbalanced by a number of negatives.
• Outside of any potential trade deal, importing and exporting could become more
challenging. If a Trump administration places tariffs on goods from China and
elsewhere UK retailers presentin the US could find it more expensive to bring goods
into the country, a particular problem given the international nature of retail supply
chains.
• If the Trump trade policy results in a more closed global economy, even UK retailers
that have no relations with America could be affected. If US policy pushes up costs for
Chinese manufacturers or reduces their economies of scale, retailers might find the
goods they source become more expensive. Acost they would need to pass on
consumers or take from their margins.
• Prices in the UK may also rise for products made by American firms. Apple’s devices,
for example,are reliant on Chinese manufacturing. Any barriers to the free movement
of parts or increased costs in the supply chain will inevitably find their way through to
the consumer.
17 GlobalData: Election 2016 consequences

19
Methodology
A combination of consumer research, secondary research and market
forecasting were used to compile this report.
Consumer research in this report is based on a survey conducted with
a US nationally representative poll of consumers. 510 consumers were
interviewed on 9 November 2016 and asked about their views in
relation to the election.
All numbers relating to expenditure and forecast expenditure of retail
are taken from GlobalData’s retail model. This is updated on an
ongoing basis with inputs from official sources, retailers’ results and
trading updates, other secondary sources and industry surveys,
GlobalData’s ongoing program of research into consumer spending
and habits, and underlying economic drivers and trends. GlobalData
analysts both model and interpret this information to provide
guidance on the likely future direction of retail expenditure at an
overall, sector and category level.
Unless otherwise stated, all sources of information are derived from
GlobalData’s own research and should be referenced to GlobalData.

20
AboutGlobalData
GlobalData Retail is a research agency and consulting firm. Our work
focuses on all aspects of retailing and consumer behavior, which we
deliver through a variety of different reports and our interactive
Intelligence Centre. We also undertake bespoke research and
consulting work for our clients.
We are headquartered in New York and London,but have a team of
consultants and analysts who work around the world; together, they
help you understand the latest trends and developments in retailing
across developed and emerging markets. We also have a global panel
of consumers across most countries which we use to undertake
consumer surveys and to gauge and assess sentimentand views on
various retail issues.
We work with many of the world’s leading retailers, FMCG groups,
property firms and those in the financial sector to help them
maximize success through developing a thorough understanding of
the retail sector and its likely future performance.
Our recent clients include: Walgreens, Walmart, Target, Macy’s, Ted
Baker, Ralph Lauren, Publix, Whole Foods, McDonalds, Kroger,
Staples, Gap, eBay, Lacoste, Burberry, Amazon,Primark, H&M,
Harrods, Marks & Spencer, Boots, Tesco, John Lewis, Waitrose,
Sainsbury’s, C&A, Pandora, Body Shop,Joseph Joseph,Samsung, Azko
Nobel, Blackstone, American Express, Barclays, Unilever, Cushman &
Wakefield, Westfield, Coca-Cola, CBRE,and many more…

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