"Boris Bounce Helps the High Street" the headlines in the Times this week. The BDO Retail Tracker reported like for like sales up by almost 6% in January. It was the biggest increase in six years. Consumers are feeling more confident about the future of the economy, under the Johnson administration, apparently.
The housing market is showing signs of life. House prices were up by 4% in January, according to the latest Halifax data. December mortgage approvals increased by 4.6% year on year. Housing transactions were up by 7% in the month. The BDO data revealed sales of sofas and furniture increased by 9% in January. Feet up and watch the TV for further news on Brexit the guideline. On the look out for policy gaffes, the comedy option, as new ministers move into office.
The service sector enjoyed a solid recovery in January according to the latest PMI data. New orders, more employment and continued business activity pushed the index up almost four points to 53.9 from 50.0 last month. A combination of greater consumer confidence and business confidence had translated into rising client demand. It was the first indication of growth in five months. Positive expectations for the year ahead, continued to improve.
Respondents noted the "headwind" from delayed decision making had lifted since the general election. No fears of a Labour government with a radical agenda. No hung parliament and further legislative indecision. No concerns about Boris Johnson, dead in a ditch. A clear deadline for Brexit declared.
The surge in activity will settle in the months ahead. Growth for the year is expected to be around 1.3% with continued growth in jobs and earnings. Much is awaited in the March budget. Policy clarification is required on the ask for trade deals with the EU and U.S. An understanding of immigration policy would help. Bold statements on the greening of the economy would be better made in co-operation with the manufacturing sector, especially in the car industry.
New ministers appear to be learning their lines in a script which has yet to be written. The Home Secretary has vowed to clamp down on counter terrorism. The Chancellor has promised no alignment with the EU or any other country for that matter. Truly global Great Britain will not be bound by instructions from others.
The Tory government has a great opportunity to capitalize on the strong platform in Parliament. A series of sensible policy proposals developed in conjunction with, not isolation of, all stakeholders would help. Putting cabinet on tour will achieve nothing but road noise. A show boat on the Thames would be just as effective and greener ...
Trump Acquitted ... Pelosi lets Rip ...
The President was acquitted this week, retribution was swift to follow. Never one to hold a grudge when you can throw it, Gordon Sondland, the U.S. Ambassador to the E.U. was recalled from Brussels. Colonel Alexander Vindman and his brother were removed from the White House.
Trump is punishing witnesses who testified against him in the impeachment process. More firings are probable. The President will exact retribution on perceived enemies. It is a long list.
For Gordon Sondland it has been an expensive departure. The U.S. ambassador donated $1 million to Trump's inaugural committee. A hasty recall to Washington seems indecent. At least he wasn't routed via the Saudi Consulate in Istanbul.
The President delivered the State of the Union address this week. Nancy Pelosi let rip. Listening to Trump was all too much. The Speaker of the House ripped up a copy of Trump's speech in a premeditated action. He had refused to shake hands after all.
Trump's delivery had the fact checkers working over time as usual. The President claimed the U.S. economy is "roaring" and moving forward at an unimaginable pace. "Jobs are booming, incomes are soaring, poverty is plummeting, our economy is the best it has ever been". It is the "Great American Comeback" and it is all down to me, the claim.
A fiscal stimulus worth some 10% of GDP fueled the expansion. Accelerating and deficit the price to pay. In January the expansion continued as 225,000 jobs were added to the payroll. Earnings increased by 3.1% . Yet Trump's tariff and trade policy is damaging growth. The U.S. is now experiencing "cascading protection", as tariffs are extended on steel and aluminum products including nails, car bumpers and beer kegs to protect domestic manufacturing.
This week, Steve Mnuchin, Secretary of the Treasury, was forced to admit the U.S. economy would fail to meet his 3% growth target this year. In an interview with Fox Business Network, Mnuchin explained officials are reducing forecasts for the year by 50 basis points or more.
Boeing was to blame. "Boeing has had a big impact on our exports", Mnuchin said. Boeing bad, Tesla good, the President claimed. More tax cuts are planned to ensure the President is returned in November.
Fears Grow of Global Slowdown ...
The World Health organization confirmed yesterday the number of cases of coronavirus had increased to almost 32,000. The number of deaths had increased to 638. For the moment the mortality rate appears to the around 2%, significantly lower than the SARS rate of 10%.
Fears are mounting of a global slow down as a result of the epidemic. Commodity prices including oil, gas, iron ore and copper have fallen sharply since the outbreak began. China is the dominant consumer of commodities accounting for 50% of copper consumption. Oil consumption in China has dropped by 20%.
China's factories and transport networks have been shut down to contain the outbreak. Fears are growing of product and component shortages around the world. Chrysler warned of a shut down in Europe. Sony and Nintendo warned of unavoidable delays.
Burberry scrapped it's profit forecast for the year. Sales in China have slumped. The company has shuttered 24 of 64 stores. Those remaining open have experienced a 70% to 80% drop in revenue. Tourism will take a hit. Cathay Pacific urged staff to take a three week unpaid holiday to cut costs.
Chinese officials have suggested growth could be hit by one percentage point in the first quarter. Oxford Economics believe China's GDP could fall from 6% to 4%, with a possible impact on global growth of 0.25%. The forecasts assume the outbreak will be contained within a three month period with a six month duration in total. Thereafter the bounce back will be swift and significant with any losses to output recovered in the year as a whole. As with all crises, this too will pass ... we can but hope so ...
That's all for this week, have a great weekend. We will be back with more news and updates next week.
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for updates on the UK and World Economy.
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