How do you like your PMs cured ...
Not long to wait ... the next Prime Minister of Great Britain will be in office on Wednesday. Boris Johnson is odds on favorite to win the Tory vote. This man will accept the poisoned chalice, to get Britain out of the EU.
Such are the twists and fortunes of the Brexit challenge, Boris could be out of office by the end of October, if things go badly.
The task is urgent. Another horrific tale of Brussels bureaucracy was revealed this week. Vacuum packed kippers sent through the post, must be accompanied by a plastic ice pillow, Boris revealed. Producers in the Isle of Man, are furious at the extra costs involved, a result of another useless layer of EU red tape. Leaving the EU would allow the UK to end this "damaging regulatory overkill". Putting kippers back onto a fair cost, eco-friendly platform, a key item in the Johnson agenda.
"Pointless,expensive, environmentally damaging health and safety. When we come out we will be able to end this damaging regulatory overkill and do things to boost Britain's economy. We will be able to establish an identity as a truly global Britain and get our mojo back." Johnson explained. Are yes our mojo, that "Magic charm, our talisman, the object, an inscribed ring or stone, thought to have magic powers and to bring good luck."
Boris as Prime Minister, will be on a quest for the holy grail of challenges, the search for the missing British mojo. A challenge akin to extracting the "Tory sword of Damocles from King Arthur's stone" begins with taking the plastic pillow from beneath the head of a smoked herring.
It shouldn't be too difficult. The Isle of Man is not part of the EU and "the case described by Mr Johnson falls outside the scope of EU legislation, it is purely a national competence" explained Anca Paduraru, a European Commission food safety spokesperson.
A yes national competence ... never in doubt ... we can send the pillow packing, packing in or out of the EU ...
Retail Sales Rally in June ...
More good news on the economy this week. Retail sales bounced back in July. Sales volumes increased by 4% in volume and value in the month. The number of people unemployed fell again in the latest data to just under 1.3 million, the unemployment rate held at 3.8%.
Earnings are on the rise. Growth in average weekly earnings increased to 3.4% for total pay (including bonuses) and 3.6% for regular pay (excluding bonuses). In real terms (after adjusting for inflation), total pay is estimated to have increased by 1.4% compared with a year earlier. Regular pay is estimated to have increased by 1.7%.
The growth in real earnings is expected to be maintained. The latest inflation data CPI based suggested the headline rate of 2% in May was maintained in June. Underlying inflationary pressures are weak. Manufacturing prices (output based) were up by just 1.6% in the month, input costs were negative, assisted by the weakness in oil prices.
The blot on the landscape for the UK economy appeared late in the week. The borrowing figures for June revealed an increase in borrowing of £7.2 billion compared to £3.4 billion prior year. For the three months of the new fiscal year, borrowing was up by £4.5 billion to just under £18 billion. An increase in government spending largely to blame, the prospects for the year will not be enhanced by the announcement of public sector pay increases ahead of inflation.
The government target of £30 billion borrowing in the current financial year is now at risk. Phillip Hammond has already warned there is little or no money to fund the Johnson tax promises. This week the OBR warned a no deal Brexit would lead to recession and an increase in borrowing of over £30 billion by 20/21.
The search for the lost Mojo, may well be hampered by lack of funds. The new administration faces daunting challenges to achieve a Brexit exit by the 31st of October. It is an impossible task. A snap election no way to gamble the Number Ten dream. For the moment the prime task is to become prime minister. Once overnight in Downing Street, time then to reveal the strategy of "one bed, many dreams" ...
Market Watch ...
Sterling on the rack this week, the Pound closed below $1.25 against the dollar having tested $1.24 in the process. The prospect of a no deal Brexit spooked markets, the threat of a snap election will not help.
In the U.S. the Fed is expected to cut rates by 25 basis points next week despite strong jobs growth and consumer spending data. Markets were confused by the speech from New York Fed
President John Williams suggesting the Fed raised rates ahead of the curve. Williams suggested "more aggressive and preemptive action is warranted when the economy is weakening". Markets began to price in a higher rate cut. The New York Federal Reserve issued a rare clarification. The speech was not intended as a market signal, more an outline of twenty years academic research. Markets closed lower.
"We have not seen anything like this before and we are not sure what they are thinking" said Neil Dutta, head of economics at Renaissance Macro research. It was left to the President to explain the process.
"Because of the faulty thought process at the Federal Reserve, we pay much higher rates, our interest costs are much higher than other countries, when they should be lower. We must stop with the crazy quantitative easing. We are winning big, it is no thanks to the Federal Reserve"
Jerome Powell, lock him up, or send him back ... drain that swamp, take back control, Taylor rules OK ...
That's all for this week, have a great weekend. We will be back with more news and updates next week!
The Saturday Economist
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