 The election race is up and running. Boris Johnson is in the saddle, on the platform, in the hospital, in the school, on the case. Never in the field of human voting, have so many photo opportunities been offered, to so many, by so few.
Jacob Rees-Mogg has been shuttered for the campaign duration. A series of unfortunate remarks on LBC about the Grenfell fire, confined the Victorian exemplar to barracks in Somerset. Andrew Bridgen, MP for North West Leicestershire, was dispatched to defend the Mogg. "Jacob is a good friend of mine. He is an extremely compassionate, intelligent human being". He just doesn't get to meet many poor people. "I think of either of use were in a fire, we would ignore the advice of the Fire Brigade and leave the burning building". Nanny would advise to tie silk sheets together with lace handkerchiefs, hang them from a window and ask the gardener to test the escape route before toffs lives were put at risk. "We want clever people running the country and that is why he is in a position of authority", Bridgen explained. As if that were a reason! By the following morning, Bridgen was forced to recant. "I realize what I said was wrong and caused a great deal of distress and offence". [especially in campaign headquarters]. Jacob is not an extremely compassionate, human being ... Sajid Javid, had his moment in the limelight. The Chancellor announced an easing of fiscal constraint to accommodate an increased in deficit spending of some £20 billion per annum. The spending would be allowed to rise to around 3% of GDP. A modest expansion compared to Labour largesse running into hundreds of billions. Moody's fired a warning shot. The UK's credit rating has been cut over concerns about public sector finances and fears Brexit could damage economic growth. "No matter what the outcome is of the general election, the agency sees widespread political pressures for higher expenditures with no clear plan to increase revenues to finance that spending". The OBR forecasts were withheld during the purdah period. The Treasury were not allowed to comment on Labour spending plans. The Bank of England released the November Monetary Policy Report. The MPC agreed to hold rates. Two of the nine members of the MPC voted for a rate cut. The Bank expects growth of around 1.3% this year and in 2020 with inflation set to remain below the 2% target. It must have been a difficult forecast to put together. In the absence of any clear resolution about the structure of parliament, spending plans, borrowing targets and the continued uncertainty about Brexit, Governor Carney may well be pleased this will be his first and last submission of the "Monetary Policy Report". Keep America Great ... Let's keep America Great! The U.S. electorate may decide to vote Democrat. The Republicans faced a setback in Kentucky and Virginia this week as the impeachment process rumbles on. The President may be obsessed about the Whistle blower but the noise is rising to a cacophony as evidence flows in the impeachment inquiry. This week, Fiona Hill, former special assistant to the President on European and Russian affairs, gave evidence behind closed doors in a ten hour session. Evidence was also provided by Lt Colonel Alexander Vindman. Vindman is the U.S. army lieutenant colonel serving as the Director of European Affairs for the National Security Council. From both testimonies it is clear, there can be no doubt, Trump sought a quid pro quo with the Ukraine. $400 million of military aid was withheld pending investigations of American politicians. A visit to the White House was also on the table assuming officials in the Ukraine complied. Gordon Sondland U.S. ambassador to the European Union, has admitted in deposition, military aid was contingent on the investigations Trump desired. Mick Mulvaney, Trump's acting chief of staff was complicit in the arrangements to secure a meeting in the Oval office. Rudy Giuliana and associates, Igor Fruman and Lev Parnas, were involved in the skulduggery. Igor and Lev were arrested last month attempting to leave the country with a one way ticket. The may face federal charges of funneling foreign money to U.S. politicians, while trying to influence U.S. Ukraine relations. For John Bolton, national security advisor to Trump until September this year, it was all too much. Bolton had warned Giuliani "is the hand grenade which will blow us all up" Bolton repeatedly told staff and colleagues in the administration that "nobody should be talking with Rudy Giuliani". Chaos in the White House continues. Later this month will be published "A Warning". The book’s author says Trump moves from one crisis to the next, “like a twelve-year-old in an air traffic control tower, pushing the buttons of government indiscriminately, indifferent to the planes skidding across the runway and the flights frantically diverting away from the airport”. Turning to Trump’s early morning Twitter rants, the author writes: “It’s like showing up at the nursing home at daybreak to find your elderly uncle running pantless across the courtyard and cursing loudly about the cafeteria food, as worried attendants tried to catch him. Just on year to the 2020 election ... a chance to Keep America Great ... which way will the American public vote? Will Trump be on the ticket ... Moscow 2019 ... We are off to Moscow next week as a guest of Gazprom. I shall be speaking at the fourth annual leasing conference. This year’s main theme of the Conference is “Leaders’ Strategies, The fight for new markets. I shall be speaking on “How companies adapt their marketing strategies under the influence of digital disruption”. Want to know more, we shall be updating our work on digital disruption to include the latest “Moscow Chapter” before the end of the month! That's all for this week, have a great weekend. We will be back with more news and updates on the 23rd November, John
0 Comments
 And so it came to pass. The EU granted an extension. Boris Johnson called for an election. The house voted voted 438 to 20 to deliver the third trip to the hustings in less than five years. So much for the fixed term parliament act, members of parliament appear to be as disillusioned with the process, as the general public at large.
Boris Johnson is ready for action. The Tory platform is clear. We will be leaving the EU on the 31st January. No deal Brexit is off the table. The deal is done. "Oven ready, just slam in the microwave", the rather unappealing gastronomic option. The Conservatives are way ahead in the polls. The election will deliver a clear working majority in the house, or so it is thought. Much can go wrong over the next six weeks. Nigel Farage plans to disrupt the "Bake Off". The President of the U.S.A. intervened. Nothing much to worry about at home, Trump dropped in to the Farage LBC radio show, to offer support. Farage-Johnson would be an unbeatable dream ticket. The deal with the EU may leave the UK free to trade with the rest of the world but a US trade deal would be virtually impossible, he explained. The UK would have to accept chlorinated chicken, hormone injected beef and must be prepared to deliver the dirt on Joe Biden. Farage took great delight in outlining his demands for a place on the ticket. Johnson had no problem refusing. This is not the time to be associated with a hard Brexit and no time to be associated with a President on the verge of impeachment. The race is on, the vitriol will pour, promises will be made, excessive spending plans will be revealed, the IFS and the OBR will explain the funding shortfall. The one consolation, it will all be over by Christmas and then we can start all over again ... House Prices in Stasis ... Trump and tariffs, Boris and Brexit are the major issues taking their toll on economic activity. Now we add impeachment in the US and an election in the UK to add to the confusion about just what happens next. Nationwide this week revealed house prices were pretty flat in the month of October. Annual house price increased have been below 1% for eleven months in a row. Robert Gardner, chief economist explained, “Indicators of UK economic activity have been fairly volatile in recent quarters, but the underlying pace of growth appears to have slowed as a result of weaker global growth and an intensifying of Brexit uncertainty." Should we worry so much about house prices? Not really. A slow down in prices contrasts with a near 4% growth in earnings in the latest date. The Nationwide price to earnings ratio is easing off recent highs. The move down from the recent 6.0 highs compares to a long run average of 4.5. A slow down in prices will improve affordability and housing access for first time buyers. The slow down in price rises may improve volumes into the New Year as the political uncertainty clears Further news from the motor trade confirms a further drop in production in the month of September. Output fell by 4% in the month, down by 16% in the year to date. 80% of manufacturing is destined for the export market. Over half of which is shipped to the EU. This week, Fiat, Chrysler, Peugeot, Citroen and Vauxhall announced a merger that could see the enlarged group become the world’s fourth-largest car maker. The news increases the prospects of plant rationalisation in Europe and concerns about Vauxhall commitment to the UK. Manufacturing took a further hit in the latest PMI data for October. We still expect growth in the UK to be around 1.2% for the year as a whole. Most analysts expect a further slow down in 2020 to just 1%. No recession in sight, the surprise next year may yet be to the upside, if the political uncertainty clears ... The Genius of Our President ... Excitement in the U.S.A. is building. The impeachment process is underway. John Kelly, the President's former chief of staff had explained to Donald Trump, the importance of not appointing a yes man to the role. A yes man, prepared to follow the Presidents whims and wishes, would lead to an inevitable impeachment, he warned. And so it came to pass. The Democrats moved to impeach. The White House was quick to issue the riposte. Stephanie Grisham, Director of Communications, explained "John Kelly, was unequipped to handle the genius of our President". Kim Jong-un was impressed, firing off a few short range missiles in celebration, a reminder there was still a Nobel Peace Prize on offer on the Korean peninsula. No prize for economics in the U.S.A. Growth slowed to just 2% in the third quarter as business investment slowed. Government borrowing increased to $1 trillion dollars in the financial year, the unemployment rate increased to 3.6% in October. The Fed cut rates by a further 25 basis points mid week placing the blame on trade uncertainty and the Trump tariff plans. 128,000 jobs were added to the payroll in October, assuaging fears of recession in the current year. We expect growth of just 2.3% in 2019, analysts expect a further slow down to just 1.8% in 2020. It could have been and should have been so much better. The economy was unequipped to handle the genius of the President. The genius was unequipped to handle the complexity of the economy. This week the Trumps announced they are changing residence from New York to Florida. The tax breaks may be better, but is also makes for a better retirement home. That may be sooner rather than later if the Democrats have their way ... That's all for this week, have a great weekend. We will be back with more news and updates next week! John  No money to spend ...
It was to have been The Chancellor's big moment. The budget date set for the 6th November. Bonfire of the Sanities, the government was set on a spending spree to cut taxes and boost expenditure on health, education, defense and almost everything else for that matter. No time to fix the roof, the objective to please the electorate and return to power with a working majority to empower the front bench to back foot remainers in the house. More police in the capital, mainly to escort members of parliament in and out of the office. It would have been a great occasion, with a few fireworks for good measure. Alas it was not to be. The Tory timetable began to fall apart as the Prime Minister failed in his attempt to leave the EU by the end of the month. Boris Johnson was committed to taking the EU out of the EU on Halloween. He had also committed not to ask for an extension to the Article 50 period. The compression timetable to rush through the withdrawal agreement through the house was rejected. In the latest twist, the government announced on Thursday, the PM will let MPs give proper consideration to the withdrawal bill, provided the House agrees to a general election on the 12th December. This "Quid Pro Quo" a "non sequitur", is causing confusion in the direction of travel for Labour and Tories apart. The prospect of an election in December, rendered a November budget redundant. Probably just as well. The latest borrowing figures suggest the government is set to borrow over £50 billion in the current financial year. An increase of over 5% in spending in the year to date, led to a borrowing increase to £40 billion in the first half of the year compared to just £30 billion last year. Borrowing will exceed the 2% of GDP target attributed to fiscal prudence. No real room for tax cuts or for an increased in spending for that matter. The Chancellor will have to take time out to re write the guidelines for budget planning. No time to fix the roof, the Chancellor is carrying an umbrella as he leaves Number 11 Downing Street. It is a subtle message about the financial largesse to follow perhaps ... The extension will just have to wait ... Want an extension? You will just have to wait says Donald Tusk, President of the European Council. Having asked for an extension that he didn't want, the Prime Minister has introduced the prospect of an election that he probably doesn't really need before the end of the year at least. Make a decision on the election and we will make a decision on the extension, says the EU. Agree the withdrawal agreement and we will agree to an election say the opposition parties. Agree to the election and we will provide an extension to the period to discuss the withdrawal agreement says the Mogg. "I may not agree to anything" says Macron the President of France. "Rien ne va plus" as the roulette wheel spins. Boris and Brexit, Trump and Tariffs have created an overhang on business and consumer confidence in the UK, Europe and the U.S.A. Now among the uncertainty we add the problems of an election in the UK and impeachment in the U.S. In the UK, the Tory hard liners are swayed by a 35% rating in the poll which could deliver over 400 seats in the house. The Labour Party could end up with just 150 seats. The LibDems would have 32 seats. Johnson would be returned victorious to Downing Street with "Carte Blanche" to deliver Brexit on whatever terms of choosing. Be careful what you wish for must be a concern to some in government. The Tories have a great chance to screw up the manifesto once again. Support for fox hunting and cock fighting may not feature this time. Hopefully the fiscal attraction of an amnesia tax will be forgotten. By the end of next week, it seems probable, the EU will grant an extension to the end of January next year. The House will debate the withdrawal agreement with amendments tacked on to the initial agreement. No budget in prospect before the end of year and not much chance of an election either. The uncertainty will continue into the New Year ... Trump and the Phony Constitution ... "You don't have to be a stable genius to work here but it helps." So reads a sign in the White House. It serves as a warning to all. Maybe not for much longer. The impeachment process is accelerating. Conviction in the House is a given. The President's moves suggest Republican support in the Senate may be wavering. This week Trump complained about the phony emoluments clause embedded in the U.S. constitution. The President was obliged to reverse his decision to take the G7 meeting to his own Trump National Doral Resort in Miami, Florida. The media and Democrats were to blame for the backlash claimed the President. A few calls from Senior Republicans precipitated the process. The President was clearly in breach of the "emoluments" clause in the constitution. A President benefiting financially from executive decisions, Trump could see nothing wrong with that. "Being President has cost me between $3 and $5 billion dollars" claimed the President. What's wrong with a little give back? "I should be allowed to keep my foreign gifts". Mick Mulvaney acting head of staff, explained "The President still considers himself to be in the hospitality business". The founding fathers would be confused by the claim. Doral is struggling and could do with a little cash, the more likely explanation. The Trump empire is seeking too ditch the D.C. hotel, concerns about the Trump lost revenue claims begin to accelerate. The President is surrounded by doubtful advisers now the adults have left the White House. Mulvaney agreed the Ukrainian conversation was a quid pro quo. When asked about the political interference in foreign policy he stated "That's what we do!" This week John Bolton revealed he considered Rudy Giuliania to be a "hand grenade which will blow us all up". Now the "personal attorney" is himself looking for a "personal attorney". Giuliani may be heading for jail. The President's personal attorney is not the only weapon in the arsenal with a penchant for self destruction. The President created additional outrage suggesting the impeachment process was akin to a lynching. The decisions on Syria, Ukraine and Doral this week will make the Democrat task much easier. The process is scheduled to go public in November ... " The Democrats offer a fair trial and a first class hanging, not literally of course! That's all for this week, have a great weekend. We will be back with more news and updates next week! John  It seemed like a good idea at the time. It was billed as "Super Saturday" after all. Parliament was meeting for the first time in over thirty years to resolve the Brexit matter. To the amazement of many, Johnson had returned from Brussels with an agreement before the October deadline. The withdrawal bill was to be put to the house, ERG were in the camp, Corbyn had been wrong footed? What could go wrong?
I decided to apply for an extension and publish the Saturday Economist on a Monday morning. In this way the clarity offered by the weekend proceedings in Westminster could be shared with readers. Decisions made, the way forward outlined, we would be leaving the EU, deal agreed. Reclaiming our sovereignty, taking back control, securing our borders, Brexit done and dusted, free to trade with the rest of the world, rebuilding the trade empires of yore. The day started well. England beat Australia convincingly to proceed to the semi finals of the World Cup. Excitement was building as the All Blacks dismissed Ireland. Next up the trip to the mother of parliaments for a serious, honest, intellectual, exchange of views and opinions. The house would sit and rise to the occasion. Johnson set the tone, It was time to heal the rift and unite warring factions. The surrender bill had been surrounded. ERG had won, just get over it. The deal was clear, Northern Ireland would remain in the single market but would be part of the UK customs union and part of the EU customs union. There would be no hard border, just a line drawn in the waters of the Irish sea. No EU tariffs on goods between Great Britain and Northern Ireland but EU tariffs on goods moving from Northern Ireland into the EU. Johnson had returned with a "lexicon of ludic loops". A collection of words and phrases not necessarily in the right order. The debate soon deteriorated into the perils of chlorinated chicken and hormone impregnated beef. Labour feared US troops withdrawn from Syria would soon be running the NHS. The paucity of debate was measured in that Theresa May was afforded the best line. It was her "sense of déjà vu "which brought the house down. How those backbenches enjoy a touch of European irony. Then came the Oliver Letwin amendment. A cunning plan to scupper the Johnson move to secure agreement before the 11:00 pm deadline. It was a "wizard wheeze". The move was passed with 322 votes for and 306 against. The Prime Minister would be obliged to climb into the ditch of despair and send a letter to Brussels requesting an extension. And so it was. The Prime Minister was obliged to send a letter to Brussels requesting an extension beyond the October 31st deadline. The Benn act demanded the PM send the letter but nothing on the statutes to say he had to sign it. The missive left Downing Street unsigned, scented with a stink bomb with drawings of a large penis with a "Bollocks to Brussels" message for good measure. How those public school boys enjoy a good laugh. A further letter explained it was not really his idea, he didn't really want an extension anyway. Please ignore the other letter. We won't need an extension, the withdrawal agreement would be put to the house this week. Jacob Rees-Moog would smooth talk the process. We are leaving at the end of the month. Gove is in charge of "Operation Yellowhammer". He has a bet with Matt Hancock to that effect, a pecuniary incentive, the wagers of sin. The Mogg has been long Sterling since the start of the month for good measure. And so it continues, into the week. A sense of exhaustion evident. BBC held a Newsnight special, a chance for Emily Maitlis to shout at politicians, expressing the frustration of a nation. Today Sky News announced a Brexit free news channel. Let's hope Question Time makes the same move. The Saturday Economist move to Monday undone by events. Cynics might suggest I was too busy watching rugby and missed the deadline. Well it was a one off, it won't happen again. Not even next week as we line up in the semi finals against New Zealand, kick off is at 9:00 am plenty of time before we hit the press send deadline. Who knows, by then we may even have an agreement ... That's all for today, have a great week ahead. We will be back on Saturday with more news and updates. Yes and may be some economics ... John  Hopes for Brexit Deal Rise ...
Markets rallied, the Pound soared, as hopes for a Brexit deal seemed possible at close of the week. A wave of optimism pushed the FTSE 250 up 500 points, Sterling closed above the $1.26 level from $1.23 last week. Britain and the EU have agreed to intensify discussions and to enter the "tunnel of talks" that may lead to a solution. The alleged progress followed a meeting with Boris Johnson and Leo Varadkar, the Irish Prime Minister on Thursday. The meeting was held at Thornton Manor in Cheshire, described as a "luxury wedding venue". Love was in the air and fudge was on the menu. Boris Johnson has resurrected plans drawn up by Theresa May for a customs partnership between the UK and the EU. "Northern Ireland, effectively stays in the EU's customs union but for the purposes of trade it's the UK's customs union". Under the plan Britain would collect tariffs on behalf of the EU for goods ending up in Northern Ireland but companies could claim rebates on goods sold on into the EU area including Ireland. Furthermore, Northern Ireland will be able to take "full advantage" of new trade deals Britain signs after it leaves the EU trade bloc." Don't throw the confetti just yet. No thought of the rules of origin, or the contradiction of an inside/out agreement. Not much can have been achieved in the two hour meeting. The EU and the UK have agreed to intensify discussions over the coming days ... and months and years ... As for the Sterling rally, the move through heavy overhead resistance at $1.25 was a bear squeeze leaving the shorts struggling for cover. By start of week, the honeymoon will be over for travelers in the tunnel of love. Travelers to the EU and beyond should expect to pay more ... Hopes For Trade Deal Rise ... In the USA hopes for a trade deal were on the rise as President Trump met with top trade official Vice Premier Liu He. The US and China struck a tentative "Phase One" deal. China will commit to buy up to $50 billion more of Agricultural products, the planned increase in tariffs on Chinese imports next week, have been put on hold. Additional agreements were reached on intellectual property protection and financial services. Trump was optimistic. Advising U.S. farmers to buy bigger tractors. "There is nothing bigger than what we are doing with China" "There has been friction between the two sides but now it's a love fest, we will have a great deal that is beyond tariffs." China Daily welcomed the move, creating as it does a "badly needed breathing space for both sides to reflect on the bigger picture". Some were more cautious. Trump can be fickle. The Chinese had done nothing to assist the Normandy landings. A cruel test of loyalty in White House world of foreign relations, to which the Kurds can attest. The mini deal brings relief to farmers but offers no long term solutions. American businesses and consumers continue to pay billions of dollars more for imported goods. The uncertainty persists as agents lobby for product exclusions from the random product list. Trump talked of a comprehensive deal but achieved a tiny truce and declared victory. Markets rallied but surrendered gains, the Dow closed 320 points higher from an initial 500 point romp. Trump's trade tactics are threatening the jobs of those who voted for him. World leaders are warning of a slow down which could spread from trade and manufacturing into financial and service sectors. The Federal Reserve moved into action, with a commitment to buy $60 billion of Treasury Bills over the next thirty days. The purchases will continue into the second quarter of 2020. "This is not QE " explained the Fed, "It is a move designed to improve short term liquidity conditions". The Fed is worried about White House policies. In the USA there is no recession coming, the Federal Reserve will make sure of that ... Hopes For Impeachment Rise ... How likely is it Trump will be on the ballot in 2020? Jennifer Rubin writing in the Washington Post this week asks the question. It has been a tough week for the President. The impeachment enquiry is accelerating. More whistles are heard in Washington. The revelation of deep state concerns on Trump's calls with foreign leaders increase. The courts have ordered the release of Trump's tax returns. The latest Fox news poll has approval ratings deep in the red. 55% disapprove, 47% disapprove strongly. Among female voters 56% disapprove strongly. This week we learned Trump ordered the withholding of aid to the Ukraine in exchange for help to dig the dirt on Joe BIden and Son. In this Trump could see nothing wrong, he had asked many other countries for similar help including Australia, the UK and China. In the House Trump would fall to the impeachment debate. The Democrat majority will suffice. In the Senate, a two thirds majority is required. The Republicans, it is thought, will stand behind their man. Really? This week GOP support was tested as the President made a brief call with President Erdogan and agreed to pull U.S. troops out of Syria. Overnight the tanks rolled into Kurdistan. The U.S. abandoned a close ally. Trump explained the Kurds had done little to assist the US in the second world war. They had not been present at the Normandy landings. No landing craft in land locked Kurdistan was no excuse. Senators on both sides of the Senate were outraged by a clear betrayal. Trump was unbowed. He had made a commitment to bring the troops home. 50 special forces troops left the Syrian battle zone. "Moving into the Middle East was the worst decision we ever made", Trump tweeted on Thursday. By the end of the week, 2000 were on their way to Saudi Arabia ... That's all for this week, have a great weekend. We will be back with more news and updates next week! John  The WTO slashed the growth forecasts for world trade this year to just 1.2%. In April, growth of just under 3% had been expected. Trade tariffs and business uncertainty led to a significant reduction in estimates in the latest update.
A "high degree of uncertainty" surrounding trade policy had led to a significant slow down in the first half of the year. The lack of progress in trade talks with China, is now yielding to the challenge of increasing tensions between Europe and the USA. The ruling by the WTO, to award punitive tariffs of some $7.5 billion dollars to the US, as a result of the subsidies paid to the Airbus launch, won't help. Boeing had paid the price of EU support, now whisky, wine and olive oil could bear the burden of a price hike by way of redress. American consumers will once again pay the price of myopic moves by the Trump administration. The EU is advocating moderation for the moment. The WTO will rule on a counterclaim against Boeing in the months ahead. In the UK, the latest survey from the British Chamber of Commerce confirms exports are sliding as Brexit uncertainty increases. Factory exports fell in the last quarter to the lowest for a "decade". Manufacturing has been affected by the continuing uncertainty of just what will happen next. The latest proposals from the Johnson administration will not help. According to the latest deal, Northern Ireland is to remain inside the free trade area but outside of the customs union. A hard board is avoided, the Irish Sea will carry the tide for goods. On the Island of Ireland an invisible border will be created using new technology in which Artificial Intelligence will play a role no doubt. No thought of rules of origin. The "deal" is a lexicon of keywords, assembled without thought or order. The EU may smile politely, the Stormont veto, enough to kill off the deal. We are leaving in less than four weeks according to the Prime Minister. Not according to the courts if the "Surrender Bill" is to be honored. The uncertainty grows and recession fears increase ... UK Recession fears grow ... This is the week in which markets brace for the latest release from the IHS Markit CIPS surveys. Manufacturing output fell for the fifth month in a row according to the latest data. The last time U.K. factories recorded five months of decline was in 2009 at the height of the financial crisis. A global slowdown, trade tensions and uncertainty over Brexit were widely blamed for the set back. In similar data for the EU area, manufacturing output contracted at the steepest rate for seven years. Output in Germany was badly affected by the slow down. Then came the construction data. UK construction is stuck in a "devastating downturn" according to the headlines. Output fell in September. The sector experienced one of the fastest declines in activity in more than a decade. A relentless six month decline in order books has resulted from Brexit uncertainty and political indecision, the explanation. So what of the service sector? Services accounting for 80% of UK output, also fell in September. The index fell to 49.5, down from 50.6 in August. Markets had expected a slow down in the month but had expected output to remain above the critical 50 point level. The latest index data signalled a cut in activity and the biggest reduction in employment in over nine years. The "All Sector Index" fell to 48.8 in the month from 49.7 in August. Fears are growing, the UK could be headed for recession in the face of continued Brexit uncertainty. The Bank indicated this week it would be prepared to act to cut rates if need be, too maintain confidence in the economy. The Bank should be slow to act. More data is required before the MPC should make a move. The latest ONS data confirms the economy grew by 1.6% in the first half of the year. We still expect growth of around 1.2% for the year as a whole. The economy would experience a significant rebound if the Brexit uncertainty was lifted. Of this there would appear to be little prospect in the weeks ahead ... but for the moment, do not be too alarmed by the survey data. U.S. Recession fears ease ... In the U.S. markets were hit on news of a manufacturing set back around the world. The US data was mixed. The U.S. manufacturing PMI increased in September to a five month high. The improvement was a modest, "slight " improvement. Expansion in production and new orders was of limited dimension. Business confidence remained gloomy due to muted demand conditions. The index posted 51.1 in September, up from 50.3 in August. So why so gloomy? Any reading over 50 indicates continued positive growth. Markets fell on the news. The Dow lost 1,000 points in the mood swing, closing at 26,000 mid week. The S&P and Nasdaq closed 3% lower as the bears squeezed. Then came the jobs data on Friday. 136,000 jobs were added to the payroll in September. The unemployment rate fell to 3.5%. Unemployment in the US has fallen to the lowest levels in 50 years. The economy is not broken. There is no recession in sight. The Fed is not expected to make a move this year. Markets rallied from mid week lows. The continued expansion in the economy continues to make the drag on trade. The trade deficit in goods increased to $74 billion in August. The deficit will hit $1 trillion dollars this year despite the Trump tariff policy. The White House now faces a full impeachment process. The President considers this to be a coup ... "As I learn more and more each day, I am coming to the conclusion that what is taking place is not an impeachment, it is a COUP, intended to take away the Power of the People, their VOTE, their Freedoms, their Second Amendment, Religion, Military, Border Wall, and their God-given rights as a Citizen of The United States of America!" Well at least he is learning on the job ... That's all for this week, have a great weekend. We will be back with more news and updates next week!  World Growth is Deflating ...
Should you be planning for the next recession? This was the theme of our Quarterly Economics Presentation in association with Brabners this week. This is the event hosted in Manchester and Liverpool in which 200 slides flash by in just 40 minutes. No wonder heads spin, as we cover the world economy and the UK in some detail. The audience warmed to the cheery theme. The world is not heading for recession as we might traditionally think of such. Central banks will not be prone to act to curb excess in the economy. We normally think of excess demand leading to rampant inflation and a soaring trade deficit, or we may think of financial shocks related to irrational exuberance in equity or debt markets. Not this time, or not yet at least. There are major problems ahead for the US economy and the twin deficit dilemma in the medium term. There will be problems generated by the price bubbles created in the sovereign debt market, which will affect the Dollar and the financial markets around the world at some stage. For the moment the world economy is not facing a sudden shock to the economy. The world economy is facing an insidious slow down in growth and trade, as a result of the uncertainty generated by Trump and Tariffs, Boris and Brexit. Central banks pushing rates to the zero bound and beyond will be powerless to act. Central governments will be limited in their capacity to introduce fiscal expansion. In the US. an economy which should be growing at 3% this year, is now penciled in for growth of around 2.3%. Forecasts for growth in China, Japan, and the EU are lowered, as world trade growth slows and manufacturing output growth is damaged. India, Australia, Singapore, Taiwan all face a reduction in growth forecasts for this year and next. This week, the U.N warned of a serious of global recession. When China addressed the UN global assembly the message was stark ... "The lessons of the Great Depression should not be forgotten. Tariffs and provocations of trade disputes, which upset global industrial and supply chains, serve to undermine the multilateral trading regime and global economic and trade order. They may even plunge the world into recession." So should we be planning for the next recession? Not just yet. Future fortunes will be determined by what happens next in the White House ... Impeachment looms ... Impeachment is coming for the President. The trigger will be the telephone conversation with President Zelensky of the Ukraine. No sooner had Trump put down the receiver in the White House residence, alarm bells were ringing among the dozen or so officials monitoring the call. Officials listened in with growing dread. The President was rambling and off script. Trump asked Zelensky for a favor. A simple request to dig up some dirt on Joe Biden and family in exchange for military aid. For Trump this was neither unusual or abnormal. For others, including Nancy Pelosi, this was a clear abuse of privilege. Officials in the White House tried to "bury" the transcripts. Trump had them released and admitted he had sought some information on Biden and had suspended military aid, to pressure the President of the Ukraine into action. So what's wrong with that? The matter had come to light via a whistle blower within the camp. A CIA plant, an expert on Ukraine had revealed the content of conversations. Nancy Pelosi, the Democratic Speaker of the House was forced to act. The calls for impeachment in Congress could no longer be ignored.The impeachment process has begun. For Trump, "I had a simple and very nice call with the new President of the Ukraine, it could not have been better or more honorable. It was very legal and very good. It was a perfect conversation with Ukraine President". Of course it was. Now comes the process of diversion and confusion. The Republican surrogates have been unleashed. The Trump Twitter storm continues. Trump is cornered. Anthony "The Mooch" Scaramucci has warned in the end Trump will turn on everyone, even the American people to secure his position. At close of week, came the hints, the administration is considering a ban on dollar investments in China and a ban on US listings of Chinese companies, including Alibaba, Baidu and JD. com. Compulsory de-listing could affect over 150 companies with a combined market cap of $1.2 trillion dollars. Markets trembled on the news as the focus moves away from an innocent phone call with a President of a place far away from Washington ... UK Borrowing Plans Up in the air ... Good news for the Chancellor this week. Borrowing fell in the month August by £0.5 billion compared to prior year. Not so good really, revisions to the data added nearly £20 billion to the borrowing requirement as a result of changes to the treatment of student loans and public sector pensions. Borrowing for the year as a whole is now likely to be over £50 billion. Borrowing plans are in the air as debt is set to exceed the 2% GDP target. The spending plans for the new administration will push debt levels to over £70 billion in the short term. That's assuming Boris Johnson remains in office. The Prime Minister lost a further vote in the House this week. There will be no parliamentary recess to accommodate the Conservative party conference. Members of Parliament are miffed about prorogation and Johnson's parlance. Talk of the "Surrender Bill" and "Betrayal of the People" is not helping the Prime Minister's popularity campaign. It is unlikely a deal will be secured with the EU, the government will be obliged to ask for an extension into the New Year. A party of national unity may emerge to effect the transition. Jeremy Corbyn has indicated he would be prepared to step aside. Ken Clarke is the bookies favorite to assume the role of leader. Boris Johnson has become embroiled in a scandal of his own this week. Impeachment may well follow. There is nothing in an unwritten constitution to prevent that ... That's all for this week, have a great weekend. We will be back with more news and updates next week! John  The Prime Minister was in Luxembourg this week. Promising to free Britain from the shackles of Europe, Johnson invoked the persona of Bruce Banner. "The Madder Hulk Gets, the Stronger Hulk Gets" explained the PM.
The prospect of a mad man in negotiations with Europe presented nothing new for EU leaders. For Boris Johnson, it's about as green as the new administration will get in pursuit of an eco friendly agenda. Sadly, the "Incredible Hulk" turned into the "Invisible Man". Johnson walked away from a planned press conference with the Grand Duchy Premier Xavier Bettel. A small but vociferous group of anti Brexit protestors was enough to put off the Hulk. "I wanted to move inside but the others would not agree", explained the PM. On such small things will the bigger issues founder. Time is ticking with no real solutions in sight. In economic news this week, inflation slowed in August to 1.7% from 2.1% prior month. Goods inflation fell to just 1.3% assisted by falls in clothing and footwear prices. Producer prices were equally muted, output prices fell to 1.6%. The Bank of England decided to hold rates this week at 0.75%. Concerns about the trade war with China and uncertainties about Brexit continue. In the event of an EU deal, the next move for U.K. rates will be up "at a gradual pace and to a limited extent". No Guts, No Vision ... In the U.S. the fed cut rates by 25 basis points this week. Despite headlines, that U.S.Indicators are trouncing forecasts. The Bloomberg Economic Surprise Index reached an 11 month high this month after four indicators released on Thursday including home sales and jobless claims surpassed expectations. The U.S. fundamentals remain strong. Uncertainty as a result of the Trump tariffs and trade wars is a cause for concern among FOMC members. Trump attacked the decision "No Guts, No Vision" the criticism. Jay Powell and the Boneheads resisted the opportunity to slash rates to zero, enabling the economy to soar like a rocket, until November 2020 at least. The President has one eye on the economic barometer and another on the poll results which are not moving higher in his favor. Seven of the ten officials voted for the cut, two opposed the move. One voted for a larger move of around 50 basis points. Either way the Fed made it clear no further reductions were expected this year. The next move for rates will be to the upside, assuming the trade war with China does not impact further on growth this year. The OECD warned this week of the impact of trade wars and tariffs on production and growth around the world. U.S. growth forecasts have been cut to 2.3% this year and 1.8% in 2020. The economy should have been expanding at 3% plus this year and next but for the havoc the Trump trade myopia presents. Headline articles in the Guardian this week included "Trump is seriously, frighteningly, dangerously unstable and the world is in danger ..." We include this in our series on The Economic Consequences of Mr Trump Chapter 1 Inside the mind of the President, it is becoming a chilling read ... Trade war enters new phase ... The trade wars entered a new phase this week. The President was under fire from whistle blower leaks. Trump had offered favors to Ukraine in exchange for dishing the dirt on Joe Biden's son. The Ukrainians were awaiting a decision on a multi million dollar aid package. Trump explained to President Volodymyr Zelensky the country could "improve it's image", if it concluded the investigation of certain corruption cases. Notably the investigation of a certain Ukraine energy tycoon. Joe Biden's son was on the board of one of his companies. Giuliani, Trump's personal lawyer, met with an aide to the Ukrainian President to thrash out the details. Asked if he had discussed Biden on his call with Zelensky in July, Trump told reporters, "It doesn't matter what I discussed, someone ought to look into Joe Biden". National security experts confirmed Trump's pressure on Ukraine was highly inappropriate. The Washington Post suggested Trump has done much to warrant impeachment but the Ukraine conversations are over the top, even for the President. Trump needed a distraction and ramped up the rhetoric with China. "Obviously, China is a threat to the world, because they are building a military faster than anybody. I view China in may different ways, but right now I am thinking about trade. And you know trade equals military." Last week trade tensions were easing, stock markets rallied. This week trade tensions increased and markets fell. Trump claimed to be in no rush to complete a deal before the election in 2020. The Chinese made note and packed up early leaving for home. A scheduled visit to the farmlands of Montana and Nebraska was abruptly cancelled. "We didn't even get to know what they wanted to discuss" said Scott Kulbeck, director of the Montana Farm Bureau. Should we be worried? Trump insisted he continues to have fond feelings for China’s leader, Xi Jinping. “My relationship with President Xi is a very amazing one, a very good one,” he said. “But we have right now a little spat.” Yep a little spat which if left unchecked could push the world into recession. When Peter Navarro, Trump's adviser on trade and manufacturing, penned "Death by China" he failed to include the Chapter on mutually assured destruction, as a result of his policy response. That's all for this week, have a great weekend. We will be back with more news and updates next week! John If you haven't done so already sign up or our Guild Messaging Group, It's FREE ... Only there can you get the latest on "The Economic Consequences of M Trump" - Chapter 1 Inside the Mind of the President, Episode 4 "The President is seriously nuts" ... Out Now ...  Sterling hit a two month high this week. The Pound closed at $1.2464 against the dollar and €1.1255 against the Euro. Much work will be required if strong overhead resistance at $1.25 is to be overcome in the near term.
Markets were encouraged by the prospects of a Brexit deal secured by a Prime Minister on serious charm offensive in the North of England during the week. Johnson has picked up the Northern Powerhouse mantle, promising a train set fit for purpose and the prospects of a bridge to Northern Ireland. Once again a "Bridge Too Far", albeit secured at a fraction of the cost of HS2. The latest news on the U.K. economy presented a mixed bag. Manufacturing fell in the latest figures to July. Construction growth disappointed, as service sector growth slowed. We expect the economy to grow by 1.2% year on year in the third quarter, following growth of 1.5% in the first half of the year. The good news, unemployment continued to fall as modest growth continued. Fears of recession were pushed aside, despite the drop in the number of vacancies in the economy. The bright spot in the data was undoubtedly earnings. The genie is out of the bottle. Earnings increased by 4.2% in the month of July. Service sector earnings increased by 4.4%. Financial sector earnings were up by over 5% and construction pay rates increased by 7%. The rate of growth in earnings will limit the capacity of the Bank of England to cut rates for the rest of the year. The Prime Minister is determined to detach the UK from the EU by the end of October. The pressure is on to secure a deal which is palatable within parliament and acceptable to the Tory election base with just thirty days available to secure sign off ... A Trade War Fears Ease ... Trump shocked close advisors this week. The President announced that Martians had landed at Camp David on Monday in a search for higher intelligence. A Presidential mind probe proved disappointing. The visitors left the following day, taking National Security Adviser John Bolton with them as a peace gesture to the rest of the world. The President explained, "John had told me in the evening that he wanted to resign, I asked him to wait until morning and he was whisked away at dawn." "I know him very well. The problem with Bolton he just wanted to nuke people. I just want to write beautiful letters and invite the Taleban to barbecues at the ranch". Peace is in the air. The President is anxious to get the troops out of Afghanistan and relocate them to his luxury resort at Turnberry at the earliest opportunity. Several exploratory visits have already been made with refueling contracts secured at Prestwick. The President talks of a third term for the dynasty but really dreads a one term tag. Talks with the Taleban, sanctions eased with Tehran, a blind eye to missile launches in North Korea anything to secure the elusive Nobel peace prize. The economy is slowing at home as government borrowing soared to over $1 trillion dollars in the first eleven months of the financial year. Fears of recession are growing as prices rise and manufacturing output and investment falls. This week, the iconic U.S. tennis ball manufacturer Head Penn Sports Group complained about the indiscriminate nature of tariffs. U.S. owned Penn was established in 1910. Five years ago production was relocated to China. The company now faces a 15% tariff on imports. Penn's principal competitor is Wilson. The company is owned by a Chinese consortium which manufactures in Thailand. The Chinese owned Wilson escapes the punitive Trump tariff and secures a significant competitive advantage in the process. Neat. Trump needs a deal with China to avoid a crushing defeat in the election next year. A delay to the next round of tariff hikes was announced this week as a gesture of "good will". Beijing responded by agreeing to suspend tariff actions on certain agricultural products including soybeans. Markets responded pushing the S&P index above 3000. Ten year gilt yields rallied to 1.83%. Recession fears are overblown. John Bolton has left the Trump orbit. The hawks are losing traction. Peter Navarro, the great architect of Sinophobia, may be the next to leave the camp. Trump needs a deal with China, the trade policy is no longer a vote winner as reality dawns on farmers and blue collar workers alike ... ECB Cuts Rates ... Extends Bond Buying ... In Europe, Mario Draghi announced a rate cut of 10 basis points. The deposit rate was cut by 0.1% to a level of -0.5%. The ECB will begin a €20 million per month bond buying programme in November. Draghi warned the risks to growth are tilted to the downside. The ECB cut forecasts for EU growth this year from 1.2% to 1.1%. Growth forecasts for 2020 have been reduced to 1.2% from 1.4%. It is not clear how pushing on a string in the face of adverse trade winds will help the process. Euro markets closed higher. Ten year bond rates rallied to -0.45%. Almost $17 trillion dollars of bond stock, predominantly sovereign bonds in Japan and Europe, offer negative yield. Draghi has one more meeting before stepping down as President. Christine Lagarde has promised a review of policy on QE and negative rates upon taking office. Not all are convinced about negative rate policy. Mass-selling German newspaper Das Bild on Friday accused European Central Bank President Mario Draghi of "sucking dry" the bank accounts of Germany's savers. Trump was quick to criticize the move and the lack of response from the Fed .... “European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting US exports ,” he tweeted “The Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!” "It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of ‘Boneheads.’" Boneheads at the Fed , Trump has discovered "accents" on his keyboard. In this way progress is made ... That's all for this week, have a great weekend. We will be back with more news and updates next week! John If you haven't done so already sign up or our Guild Messaging Group, It's FREE ... Only there can you get the latest on "The Economic Consequences of M Trump" - Chapter 1 Inside the Mind of the President, Episode 3 "Why Does Trump Admire Brutal Dictators" ... Out Now ...  A week in Westminster ...
Proceedings in the House achieved a new low this week. Boris Johnson accused Corbyn of being a "Big Girl's Blouse" and a "Chlorinated Chicken". David Cameron was described by the Prime Minister as a "Girly Swot". The "Mogg" was reprimanded for sprawling over the front benches in a contemptuous display of arrogance and self importance. It had been a tough week for Johnson. Oscar Wilde would be lost for words. To lose one vote is unfortunate. To lose three in two days is much more than carelessness. The Prime Minister lost his majority of one, when Tory MP, Phillip Lee crossed the house to join the Lib Dems. Neutered in Parliament, the administration decided on the full chop, sacking Tory Rebels including Phillip Hammond, Ken Clarke and Nicholas Soames. The majority of one was reduced to a deficit of forty three with a careless coup. So much for love-bombing opponents. Two chancellors, the father of the house and the grandson of Churchill were thrown out of the Conservative Party. The lights are going out all over Downing Street. Johnson is achieving the chaos in government in just three weeks, to which Theresa May could only aspire in three years. If Dominic Cummings has a playbook, it must be written in strange tongue. Forced to accept the decision of parliament to postpone the Halloween exit from the EU without a deal, the master stroke was to call for an election. Boris explained ... "I don't want an election, you don't want an election, he or she doesn't want an election" "We don't want an election. you (plural) don't want an election, they don't want an election". Amo, Amas, Amat , Amamus, Amati, Amant ... Johnson declined the verb, Corbyn declined the invitation. It was an invitation to jump into an elephant trap, covered by scant coverings of brushwood and a red flag. Somewhere in the Cummings playbook, there must be an outline of which way the votes would go in a rush to to the polls. Not everyone will play with the rules. The Prime Minister has explained he would rather be dead in a ditch, rather than ask for an extension from the EU. Resignation is not ruled out in the play book, thrown in jail for failing to follow the ruling of parliament must be in appendix two. The no deal option is now written into law. Johnson has a deadline to secure a deal by the middle of October. If no deal is secured, the exit is extended to January. The election no one wants may well take place before the end of the year. Sound and fury of the hustings, a result signifying nothing may ensue, a hung parliament beckons and off we will go again as the EU looks on ... A Decade of Renewal ... The Chancellor of the Exchequer announced his spending review this week. A decade of renewal is in the offing. More money for education, the police, defence and the health service, more money for local government including almost £2 billion for social care and welfare services. An extra £14 billion is on the table as the economy slows. Cynics may suggest this looks like a pre-election giveaway. To some it looks like a preparation for social unrest. More police on the streets, more money for water cannons, more money for riot shields and batons ... Sajid Javid has confirmed the results will follow the fiscal guidelines. Borrowing never to exceed more than 2% of GDP, total borrowing to continue to fall as a percentage of GDP. It may well be a challenging arithmetic. The economy is slowing. The latest surveys on manufacturing and construction are particularly pessimistic. Business confidence is flagging, stalling commitments to investment and job creation. The latest data on borrowing confirms borrowing in the first four months of the year was up by 60% compared to prior year. Government borrowing could be over £35 billion this year. Add in the budget for decades of renewal and the 2% target will be tested. The age of austerity is over as the decade of renewal begins. Decades of debt will follow. Expect to hear more of Modern Monetary Theory as the old fiscal guidelines are hung out to dry on the Magic Money Tree. MMT rules OK ... the beauty is there aren't any. Trump's trade war hits manufacturing ... Tough week for the President. Hurricanes hit the Bahamas, and Florida. The President played golf, then spent an inordinate amount of time explaining why he had been right all along to warn of the impending storm about to hit Alabama. The week had begun with the announcement of a further round of tariffs on goods from China. Products faced with a 10% tariff were to face a further hike of 5%. The President was furious and angry about Chinese retaliation. Trump had wanted to double the tariffs. Aides and advisors advised against the move. Further damage to stock market sentiment and the economy would ensue. It is now becoming pretty clear, the economy is slowing and Trump trade policy is to blame. The President has promised to revive the fortunes of the U.S manufacturing sector, bringing jobs back to his blue collar base. Latest data suggest manufacturing output is falling for the first time in three years. Job growth slowed to 130,000 in August. The unemployment held at 3.7%. The job data may well be revised up. No time to call recession yet despite the yelps from the yield curve. To the world it is becoming clear Trump tariff policy is damaging world trade and growth. The implications are widespread, not just confined to the U.S. and China. Growth in Australia and Singapore featured this week. Growth forecasts in Singapore are written to zero as trade with mainland China slows. In Germany the manufacturing sector is damaged by the double whammy of tariffs and Brexit. For Trump, it is clear the Federal Reserve is to blame. "Where did I find this guy, Jerome?" the President asked of Jerome Powell Chairman of the Federal Reserve, "Oh well, you can't win them all" the tweet. "You can't with them all but you can always blame others" the mantra of the 45th President of the United States. That's all for this week, have a great weekend. We will be back with more news and updates next week! John If you haven't done so already sign up or our Guild Messaging Group, It's FREE ... Only there can you get the latest on "The Economic Consequences of M Trump" - Chapter 1 Inside the Mind of the President, Episode 3 out next week. Don't miss that! |
The Saturday EconomistAuthorJohn Ashcroft publishes the Saturday Economist. Join the mailing list for FREE weekly updates on the UK and World Economy. Archives
November 2019
Categories
All
|
| The Saturday Economist |
RSS Feed
The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The presentation should not be construed as the giving of investment advice.
|
The Saturday Economist, weekly updates on the UK economy.
Sign Up Now! Stay Up To Date! | Privacy Policy | Terms and Conditions | |