U.K. net immigration is falling. EU citizens are voting with their feet and they are not the only ones! According to the latest data from the ONS, net migration was 246,000 in the year ending March 2017, down 81,000 from 327,000 prior year.

More than half of the change in net migration can be explained by a decrease in the number of EU citizens. Higher growth in Europe, pressure on Euro adjusted earnings and the ambivalence, neigh indifference, of government attitudes to EU citizens is forcing a rethink about the desirability of living and working in the UK.

And what of education? 139,000 of entries into the UK were for the purpose of formal study. With 25,000 U.K. students heading overseas, the net gain to the education sector in the UK was 114,000. It is time to take students out of the immigration stats once and for all.
 
Net migration, excluding students, was just 132,000. Unemployment is at a record low of 4.4%. Recruitment challenges in agriculture, health, welfare, education are increasing. With 750,000 vacancies, the net contribution of 100,000 immigrants each year, will be a challenge to growth in the economy. It will also be a challenge to business, forced to pay for the privilege of employing those of foreign disposition.

Should we worry about the prospects for Brexit?
Not at all, according to Patrick Minford, Chairman of the Economists for Free Trade. Hard Brexit would eliminate protection and regulation in favour of free trade and full competition. It would remove taxpayer subsidy from unskilled migration. These moves would benefit UK consumers, lowering the cost of living by 8%, raising productivity across the economy, with a total gain in UK welfare and GDP of around 4% from free trade and another 2% from improved regulation, a total gain to GDP of 6%.

On top of this there are gains from regaining our net EU budget contribution (0.6% of GDP) and removing the taxpayer subsidy to unskilled Immigration (0.2% of GDP). There will also be longer term gains to growth through enhanced innovation and entrepreneurial activity.

Just as the "abolition of the Corn Laws precipitated the Industrial Revolution", Hard Brexit is good for the UK economically while ‘soft’ Brexit leaves us as badly off as before. Reassuring? Not really but it gets better ...

According to Crawford Falconer Chief Trade Negotiation adviser at the Department for International Trade … Britain post Brexit, can drive the world toward free trade and with it bring world peace and prosperity ... Excellent.

Some times I think of six impossible things before breakfast, the Economists for Free trade manage to cram most of them into "From Project Fear to Project Prosperity" How Brexit is worth £135 billion to the UK economy! Yep, fit that on the side of a bus!

Of Growth and Borrowing ...
Government borrowing was in surplus in July, the first time since 2002. OK let's not get too excited. £0.2 billion is a small drop in the near £2 trillion debt overall but it helps. Year to date, borrowing is up by £1.9 billion to £22.8 billion. For the year as a whole, we expect the deficit to be around £55 billion compared to £45 billion in the last financial year. It's all going so well, or is it?

The ticking time bomb is debt. Interest costs in the first four months of the year were up by 23%. In the full year debt service costs could rise to £60 billion compared to £48.4 billion last year. The full cost in the year is mitigated by the "Money for Nothing, Gilts for Free" QE Rebate of £12 billion last year but the warning is clear. Normalised interest rates and gilt yields will increase the debt service cost to over £90 billion. No time to relax spending plans. No time to reverse the Bank of England gilt holdings anytime soon. The kindness of strangers and the generosity of an Old Lady in Threadneedle Street are too important for solvency.

The second estimate of GDP was released this week. Growth in the economy was up by 1.7% in the seond quarter. There were little or no revisions to output growth. The service sector was once again the driver of expansion, up by 2.3% following adjustments to the data earlier published for April and May.

Household spending growth was up by 2%. Business investment was flat. The trade deficit continues to provide a negative impact on overall expansion. So what now of the year as a whole? Markets expect growth on 1.6% in the year, slowing further in to 2018 as household incomes are squeezed and investment falls. We remain more optimistic for the current year. Growth of around 1.9% is possible, as inflation moderates towards the end of the year.

Forecasting into 2018 becomes more difficult. The world economy is moving towards steady growth. The Eurozone is recovering. In the U.K. uncertainty about the Brexit deal will hamper business investment. The Euro is the currency of choice, pushing the pound to parity in the near term. Without a policy for the currency and for EU negotiations, some clarity is required if the UK is not to languish further in the world growth league.

Don't Miss the Economics Conference on the 13th October.
Our theme is the Economics of Greater Manchester. We will be talking about the Inclusive Growth Challenge, Balancing the Books and the Sectors Driving Growth in the City Region! Another Great Conference in the pro-manchester series . We have a great line up of speakers to be announced soon. Book Now Don't Miss Out ...
John
No market updates this week, Mary and I are in Sicily, personally experiencing  the demise of sterling and the rise of the Euro. Have a great week-end ...

Thanks for your feedback on the Saturday Economist Net Promoter Scores survey. Here's what you are saying about the weekly update! Thanks.

© 2017 John Ashcroft, Economics, Strategy and Social Media, experience worth sharing.
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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 receipt of this email should not be construed as the giving of advice relating to finance or investment.
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If you do not wish to receive any further Saturday Economist updates, please unsubscribe using the buttons below or drop me an email at [email protected]. If you enjoy the content, why not forward to a friend, they can sign up here ...
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Copyright © 2017 The Saturday Economist, All rights reserved. You are receiving this email as a member of the Saturday Economist Mailing List or the Dimensions of Strategy List. You may have joined the list from Linkedin, Facebook Google+ or one of the related web sites. Our mailing address is: The Saturday Economist, Tower 12, Spinningfields, Manchester, M3 3BZ, United Kingdom.

Consumers Coppering Up ... Of Retail Sales, Jobs and Inflation ...
Retail spending increased by over 4% in July according to the latest data from the ONS this week. Sales volumes increased by just 1.3%. Consumers are spending but getting less for the money as inflation hits the high street. Great news for retail, higher prices and higher margins, with less work at the till, a blissful trilogy for retail success.

In the second quarter as a whole, retail sales volumes increased by 2.6%, spending increased by almost 6%. In the same period last year, volumes increased by over 4% but spending increased by less than 2%. Households are spending despite the apparent squeeze in real incomes. If the trend is maintained, fears of a consumer slowdown this year will evaporate.

Inflation is hitting the high street. The headline index CPI was up by 2.6% in July unchanged from the prior month. Goods inflation at 2.7% moved ahead of service sector inflation (2.6%) for the first time in almost five years. Producer prices increased by 3.2%. Input costs slowed to 6.5% from a peak of 20% in January. The impact of oil prices and sterling depreciation is working out of cost pressures. We expect inflation to moderate towards the end of the year. Inflation CPI should close around 2.5% assuming no real acceleration in earnings.

Job numbers this week, suggested strong growth continues in the UK. Unemployment fell to 1,484 million. The unemployment rate fell to 4.4%. The U:V rate fell to 1.9. Vacancies in the economy numbered 768,000.
Earnings increased by 2.8% in the month of June. Private sector earnings increased by 3.1%. Finance and business sector earnings increased by 4.1%.

The long awaited acceleration in earnings, may be appearing. We expect earnings to increase by over 3% by the end of the year, maintaining price pressures, offsetting the slowdown in imported inflation. Strong growth, a tightening jobs market, inflation above target, interest rates at 25 basis points. Sometimes, like Alice, I think of six impossible things before breakfast ... monetary policy and the government approach to Brexit always feature ... 

Sterling weakness boosts tourism  ... true
Weaker sterling attracts record number of foreign tourists to the UK, is the headline in the Guardian today. ONS figures reveal there were 3.5 million visits in the month of June an increase of 7% on a year ago.

Tourism is one area of trade which demonstrates price elasticity and a response to the vagaries of sterling. UK visits overseas are expected to increase by 4% this year, compared to 7% growth last year. We model tourism as a function of relative wealth and price. Much traveling to be done if the trade deficit is to be eliminated.

We expect the volume of foreign visits to the UK to increase to over 40 million this year. Visits abroad for UK residents will increase to over 70 million. The deficit on tourism will be over £20 billion once again this year as in 2016. It hasn't been so high, since 2008 ... More information and charts on this and more, are available in The Saturday Economist Library.

That's all from the West Wing Whisky Tango Foxtrot this week. It has been a chaotic week, make that four weeks. The President has attacked the Attorney General, the leader of the Republican Party and the GOP as a whole. Who would have thought governing a country could be so difficult ...


Don't Miss the Economics Conference on the 13th October. Our theme is the Economics of Greater Manchester. We will be talking about the Inclusive Growth Challenge, Balancing the Books and the Sectors Driving Growth in the City Region! Another Great Conference in the pro-manchester series . We have a great line up of speakers to be announced soon. Book Now Don't Miss Out ...

John
Markets are mixed on news from the White House. The president's plans for tax cuts and infrastructure spending are under threat. That's all for this week. Have a great week-end ... We are getting some great feedback on the Net Promoter Scores survey. Thanks.

© 2017 John Ashcroft, Economics, Strategy and Social Media, experience worth sharing.
______________________________________________________________________________________________________________
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 receipt of this email should not be construed as the giving of advice relating to finance or investment.
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If you do not wish to receive any further Saturday Economist updates, please unsubscribe using the buttons below or drop me an email at [email protected]. If you enjoy the content, why not forward to a friend, they can sign up here ...
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For details of our Privacy Policy   and our Terms and Conditions check out our main web site. John Ashcroft and Company.com
_______________________________________________________________________________________________________________
Copyright © 2017 The Saturday Economist, All rights reserved. You are receiving this email as a member of the Saturday Economist Mailing List or the Dimensions of Strategy List. You may have joined the list from Linkedin, Facebook Google+ or one of the related web sites. Our mailing address is: The Saturday Economist, Tower 12, Spinningfields, Manchester, M3 3BZ, United Kingdom.

"From ice cream to swimwear you can find UK holiday exports in travel destinations around the world", claimed Liam Fox the Trade Secretary this week.

The UK exported more than £302 million of holiday products including £160m of sunglasses, £93m of swimwear and £8 million of flip flops. Dr Fox confirmed his department was supporting British business. "Taking advantage of the growing global markets for home-grown summer essentials." Summer Loving! Excellent!

The Trade Minister is quick to spot the gap that British businessmen, "Fat, lazy and playing too much golf", are slow to exploit.  Who would have thought Britain had a revealed comparative advantage in sunglasses and flip flops? It's nonsense of course. The UK has a trade deficit in sunglasses, swimwear and flip-flops. No rules of origin are included. Exports will include a significant proportion of imported product sold on to the unsuspecting Johnnie Foreigner, in the EU and elsewhere. The trade minister may lick his lips over the prospects for ice cream exports. At £16 million last year, ice-cream exports offer a wafer thin contribution to the structural trade deficit. . The ice cream surplus, melting in the reality of the £150 million import bill, according to Barry Gardiner, Labour Shadow International Trade Secretary ...

Trade deficit persists  ...
The latest trade figures for June were released this week. The deficit trade in goods increased to £34.4 billion in the second quarter. It was up from £30.9 billion last year. The trade deficit is deteriorating, a result of the U.K structural deficit. We expect the deficit trade in goods to increase to just over £141 billion up from £134.1 billion last year. The forecast is unchanged from the prior quarter and from the start of the year. The vagaries of Sterling have little impact as we have long explained

The surplus in service sector trade increased to £25.4 billion in the quarter, up from £23 billion last year. For the year as a whole the trade surplus in services will be almost £100 billion, up from £97 billion last year. The UK has a revealed comparative advantage in business and professional services. It has a particularly strong RCA in financial services. Policy makers cling to the hope of a Sterling redemption for the trade deficit. Liam Fox cannot be blamed for the trade deficit. Holiday products on the beach, is not place to draw the line in the sand to mark the reversal of fortune.

Further news on manufacturing and construction were released this week. Manufacturing output increased by 0.6% in June. For the year as a whole we expect growth of 1.2% in 2017. Construction output increased by 0.4%. For the year as a whole, we expect growth of similar dimension. Service sector growth was up by 2.9% in April and 2.7% in May. We await the official estimates for June. For the quarter as a whole, the ONS estimated growth at 2.3%. This assumes a significant slow down in June ... down to 1.5%. Our own flash forecast is more optimistic for the quarter and for the year! Check out the library for the latest details ...

The Library is open ...
This week we launched the Saturday Economist Library. Articles, updates and forecasts are available on the web site. This section is in addition to the back copies of the weekly bulletin. Over 100 articles are included now available offering much more detail on some of the stories in the weekly update. In the library we deal with the issue of depreciation and the trade balance in some depth. We will also publish back stories on investment, productivity and construction. A great source of data.

We have had some great feedback with our Net Promoter Survey. Our NPS score is around 75 currently. We like this comment from Kirk R.  "I like the unbiased opinion and agree with a lot of the points that are discussed which do not tow the party line. And this one from Ivan B. "Always an entertaining read and "usually" proves to be accurate!" Usually? Come on Ivan! I particularly like this one from Howard McWilliam ..

" I recommend it to all of my A Level Economics students. Technical language and concepts are accessible for all students and develops their ability to analyse, synthesise and evaluate. It also provides plenty of scope to stretch the most able."

Thanks Howard! Apologies to Chris P this week ... "It's a good concise window on the economic situation and West Wing WTF usually makes me smile".

Sorry Chris, no update on the West Wing this week, for the moment we can say ... "Hell hath no "Fire and Fury" like a president scorned". Trumps ratings plummet, the rant from the golf course seems like an out take from "Wag the Dog". Wag the Dog you may recall is the 1997 black comedy film starring Donald Trump and Steve Bannon. A president in trouble at home creates an imaginary war with Albania. Now read Korea/Venezuela/Ukraine/Germany/Canada/Mexico/China/. August is supposed to be such a quiet month!

Don't Miss the Economics Conference on the 13th October. Our theme is the Economics of Greater Manchester. We will be talking about the Inclusive Growth Challenge, Balancing the Books and the Sectors Driving Growth in the City Region! Another Great Conference in the pro-manchester series . We have a great line up of speakers to be announced soon. Book Now Don't Miss Out ...

John
Markets hate the noise of war. Markets take a hit as gold and the Euro prosper. That's all for this week. Have a great week-end ...

© 2017 John Ashcroft, Economics, Strategy and Social Media, experience worth sharing.
______________________________________________________________________________________________________________
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 receipt of this email should not be construed as the giving of advice relating to finance or investment.
________________________________________________________________________________For details of our Privacy Policy   and our Terms and Conditions check out our main web site. John Ashcroft and Company.com

Copyright © 2017 The Saturday Economist, All rights reserved. You are receiving this email as a member of the Saturday Economist Mailing List or the Dimensions of Strategy List. You may have joined the list from Linkedin, Facebook Google+ or one of the related web sites. Our mailing address is: The Saturday Economist, Tower 12, Spinningfields, Manchester, M3 3BZ, United Kingdom.

The Bank of England MPC voted 6 - 2 to keep rates on hold this week. The Committee voted unanimously to maintain the stock of UK government bond purchases at £435 billion. The Committee also voted unanimously to maintain the stock of  corporate bond purchases at £10 billion. 

In the August Inflation Report, the Bank downgraded forecasts for growth to 1.7% this year and 1.6% next. Concerns about household spending and investment dominate the over view. The "Old Lady" perceives a slow down in investment is materializing. Concerns about life post Brexit in the UK and the lack of a "vision for transition" are a real cause for concern. In the medium term, inflation abates, real incomes are no longer squeezed, the strength of world trade boosts net trade and investment plans return to the board room. The long term growth rate circa 1.75% would be maintained as inflation drifts back to target 2%.

So what can we make of the Bank outlook? NIESR released their August forecasts this week. Growth is expected to be 1.7% in the current year rising to 1.9% next. Forecasts for growth, range from 1.1% to 2.1% according to the latest HM Treasury data. A great chance, someone will get it right. Growth in the second quarter was just 1.7% following growth of 2.0% in the first quarter. The Bank appears to have made a fair call for the year in prospect, given the progress year to date.

So what of rates? The Governor is hinting at a rate rise. "The Committee judges that some tightening of monetary policy would be required to achieve a sustainable return of inflation to the target. Specifically, if the economy follows a path broadly consistent with the August central projection, then monetary policy could need to be tightened by a somewhat greater extent over the forecast period than the path implied by the yield curve underlying the August projections."     

Wow! At the moment, markets expect rates to stay on hold until well into next year and to remain sub 1% until 2020. Inflation is expected to peak this year and may have already done so. Strong growth in Europe and the US will create some flexibility for tightening local policy, to the benefit of the Euro and the Dollar. The Bank should take the opportunity to restore rates to 50 basis points at the earliest opportunity. Could it be as early as November ... we shall have to wait and see! ...                    

Should we be worried about personal borrowing ...
The Governor appears to be relaxed about personal borrowing despite the concerns raised by the FCA. A mere £1.6 trillion, it's  around 80% of GDP after all. Compared to the volume of gilts in issue at £1.9 trillion, of which the central bank holding is £466 billion, perhaps there are other concerns more pressing.

The majority of personal debt is secured mortgage lending. The level of unsecured personal borrowing increased in June by 8% to  £200 billion. The rate of increase has been at similar levels over the past three years. Debt levels are circa 10% of GDP, compared to 14% of GDP in 2005. In reality, a rate rise is required to cool the expansion of non mortgage lending. For the moment a careful watch is required says the Bank, with some tightening of lending criteria.

The Car Market appears to be doing it's best to cool lending and spending according to the latest data from the SMMT. Car sales fell by just over 9% in July. Private and Fleet sales were down in equal measure. Diesel car sales were down by 20%. The SMMT is forecasting a fall in output and registrations for the year as a whole. Investment in car manufacturing fell to £322m in the first half of 2017. This compares with £1.7bn in 2016 and £2.5bn in 2015. The industry is worried about life post Brexit and with good reason.

The monthly PMI Markit surveys were released this week. Manufacturing was up, construction was down and service sector growth was steady. A curious curate's egg performance in line with the performance in the second quarter GDP(O). Manufacturing was boosted by export order books, construction was hampered by a commercial sector slowdown. For the year as a whole we expect manufacturing and construction output to rise by around 1.4%. The service sector continues to offer growth of around 2.3% delivering growth of around 1.8% for the economy overall ...

Don't Miss the Economics Conference on the 13th October. Our theme is the Economics of Greater Manchester. We will be talking about the Inclusive Growth Challenge, Balancing the Books and the Sectors Driving Growth in the City Region! Another Great Conference in the pro-manchester series ... Book Now Don't Miss Out ...

John
That's all for this week. Have a great week-end ... If you enjoy the Saturday Economist, why not Join the Club.

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© 2017 John Ashcroft, Economics, Strategy and Social Media, experience worth sharing.
______________________________________________________________________________________________________________
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 receipt of this email should not be construed as the giving of advice relating to finance or investment.
______________________________________________________________________________________________________________
If you do not wish to receive any further Saturday Economist updates, please unsubscribe using the buttons below or drop me an email at [email protected]. If you enjoy the content, why not forward to a friend, they can sign up here ...
_______________________________________________________________________________________
For details of our Privacy Policy   and our Terms and Conditions check out our main web site. John Ashcroft and Company.com
_______________________________________________________________________________________________________________
Copyright © 2017 The Saturday Economist, All rights reserved. You are receiving this email as a member of the Saturday Economist Mailing List or the Dimensions of Strategy List. You may have joined the list from Linkedin, Facebook Google+ or one of the related web sites. Our mailing address is: The Saturday Economist, Tower 12, Spinningfields, Manchester, M3 3BZ, United Kingdom.