The Prime Minister danced onto stage at the Conservative Party Conference this week. I say dance, it was more an expression of limited movement, a bit like the approach to negotiations with the EU.
Bouyed by the success of the African tour, Theresa May appears to be angling for a spot on "Come Dancing" in a celebrity life post Number Ten.
We may have to wait some time. Despite rumblings on the back benches, the Prime Minister shows little signs of quitting.
"Britain's best years are still to come" assured the PM. It could have been a reference to her own career. "The end is in sight for austerity" Hurray! "We must be the party for everyone." OK.
The remarks will come as a bit of a surprise to those households set to lose £200 quid a week as a result of Universal Credit roll out. The comments will also come as a bit of a surprise to the Treasury, set to find £20 billion to $30 billion quid to fund post austerity largesse.
There were several major announcements, primarily the Chancellors begrudging freeze on fuel duty for the ninth year in a row; removal of the cap on how much councils can borrow against their Housing Revenue Account; and commitments on health care and cancer care specifically.
Most of the conversation in conference was devoted to the difficult issue of Brexit.The highlight was
of course Jeremy Hunt. He compared the EU to the Soviet Union, accusing it of becoming “a prison”, vowing to “fight” for the Brexit deal Britain wants. Excellent diplomacy, never a strong point for Foreign Secretarys of late. "Gunning for the Gulag" may become the new negotiation strap line.
Well if only we knew what we want. Canada Plus or Canada Dry? The deal from that place in the Chilterns that rhymes with wreckers. "Chuck Chequers" had become such a slogan for the Brexiteers, the term "Chequers" was dropped altogether from the Prime Minister's speech.
The Prime Minister will plough on with the plan despite resistance from Brussels and her own party. A beefed up agenda may yet win the day. "Chubby Chequers" would be my personal favourite with a "Twist Again" them tune to bodge the problems of the Irish border.
Jean- Claude Juncker, late this week, suggested an agreement could be achieved in weeks! Donald Tusk was less optimistic, it was ever thus …
House Price Steady, Car Sales Slump ...
House prices were steady in September despite headline news of a fall in prices. According to the Halifax HPI, house prices were up year on year by 2.5% in the month. The average house price was £226,000 approximately.
Russell Galley, Managing Director of the Halifax said "Mortgage approvals and housing completions remain broadly unchanged". A pick up in wage growth has eased issues of affordability slightly.
It was a similar story at Nationwide. House prices increased by 2% in September. Prices are expected to increase by just 1% for the year as a whole according to Robert Gardner, Nationwide's Chief Economist. Pessimistic? Perhaps. In general we would expect house prices to move in line with earnings. A rise of 2% to 2.5% may be possible assuming no real setbacks for the UK economy.
Setbacks for the Motor trade were evident, as new car registrations fell by 20% in September. It's the big month too! Car sales fell to 339,000 from 426,000 last year, a fall of 20.5%. Year to date sales were down by 7.5%. Diesel sales were down by 40%. The big drop was largely blamed on supply side restraints.
Manufacturers are struggling with the timetable of tougher emissions targets and regulatory approvals. The situation should ease through the rest of the year. Business confidence and consumer confidence are also overhanging sales performance in the year to date figures.
Sterling closed higher this week against the Euro and the Dollar. Excitement about a deal with Brussels pushed the currency higher ... if only ...
Strong Jobs Growth pushes markets lower ...
Strong jobs growth data in the U.S. pushed markets lower around the world. The unemployment rate fell to 3.7% as 134,000 jobs were added to the payroll. The data may have been affected by Hurricane Florence. Retail, leisure and hospitality jobs fell by almost 40,000, sectors most vulnerable to hurricane setback.
In August the payroll gain was revised up. August was already reported to be strong, but now looks to have been a blockbuster month for job creation. The previously reported 201,000 jobs added has been revised up to 270,000. Despite the strong jobs creation, wages and inflation remain muted for now.
Markets were spooked this week despite the goods news on NAFTA. The Amazon commitment to a $15 dollar per hour minimum wage disturbed as fears for earnings and prices escalated. Ten year bond yields moved higher to 3.2%. We expect a further rise to 3.5% in the short term. The Fed is committed to at least one additional rate rise this year, with more to follow in 2019.The yield curve is not inverting, long rates are rising, to offset the short rate move. The yield curve is returning to norm after years of life on Planet ZIRP, expect 3.5% rising to 4.5% over three years.
Stocks have nothing to fear from rising yields and Fed rate action for now. The moves are a reflection of strong growth in the U.S. set to expand by over 3% this year and next. Expansion will be good for earnings and share prices for some time to come ... the downward moves have been overdone ...
That's all for this week, have a great week-end, Don't Miss Our Monday Morning Update this week, we will expand further on our market views ...
The Saturday Economist
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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 presentation should not be construed as the giving of investment advice.