Bank Downgrades Forecast For Growth ...
It is the week of the Inflation Report. No surprise, the MPC held rates with little prospect of an rate hike in the months ahead. "There is a story" the Governor began his opening remarks, "There is a story, that almost a century ago, The Times ran the headline 'Fog in the Channel, Continent Cut Off'".
The Governor went on to reassure, that cutting off the continent was not the objective of Brexit. The UK is leaving the EU, not leaving Europe. "We will pursue an ambitious and broad economic partnership", he explained. With just fifty days to go, with no deal in sight, the Governor obviously knows something, the rest of us, including Parliament, do not.
It was a week in which Chris Grayling had been cut off from Calais. The Chairman of the French port authority had said, "The Transport Secretary has been disrespectful, I never want to see him again". Grayling plans to cut capacity through Dover and Calais. Capacity will be increased in other directions and by other means. More effort will be made to increase trade from Ramsgate to Ostend. A decision to award part of the £100 million contract to Seaborne shipping was reversed this week. A shipping company without ships, without experience and finance was considered to be a Bridge Too Far even for this administration.
Fog over Brexit has cast a cloud over the Bank of England. The Bank has cut the forecast for growth to just 1.2% this year. There is a one in four chance of recession if the UK leaves the EU without a deal. Fears over a no deal are haunting the board rooms of Britain. Investment decisions are on hold pending the outcome of negotiations with the EU. The good news? Inflation will remain at or around the target 2% and job growth remains strong as businesses continue to hire ... for the moment ...
Automotive trade ...
Another week of bad news for the auto industry. Nissan announced the decision to pull the planned manufacture of the X-Trail in Sunderland later this year. The head of Nissan Europe Gianluca de Ficchy said: “While we have taken
this decision for business reasons, the continued uncertainty around the UK's future relationship with the EU is not helping companies like ours to plan for the future.”
Jaguar Land Rover had previously announced job losses as a result of falling sales in China and elsewhere. This week, Tata Motors, the parent of JLR announced a $3.9 billion write down on the JLR investment pushing the Tata share price down by 30% at one stage. Credit rating agency Fitch placed the company on negative watch. "Trade barriers and logistic issues from a disorderly Brexit could have an impact on JLR's competitive position, leading to lower sales and profitability" Fitch said.
Will Corbyn ride to the rescue? This week the Labour party outlined five steps required to secure the agreement of the opposition in the pursuit of a deal with Europe. Inclusion in the single market and a customs union feature. The Irish question would be answered. The hopes of remainers on the opposition benches dashed. Many believe Corbyn would welcome a hard Brexit. An olive branch to settlement, offered by the hand of a Brexiteer may be a twig, first dipped in a poisoned chalice.
Either way, this week the Prime Minister was too busy in a whistle stop tour of Belfast, Dublin and Brussels to listen to a possible solution from the opposition. The conundrum continues, the clock is ticking. The lights are going out all over Europe ... we shall not see them lit again in our lifetime ...
State of the Union...
The President finally made it to Congress this week to deliver the State of the Union address for 2019. It was a tough audience. Nancy Pelosi looked on, as Donald Trump spoke to the Majority Democrat house.
Trump issued a call for unity as he warned that the "politics of revenge" and "ridiculous partisan investigations" threatened to derail the "economic miracle" taking place in the United States.
The US president, appealed to Democrats to reach a compromise on paying for his proposed wall on the Mexico border. "We must choose between greatness or gridlock, results or resistance, vision or vengeance, incredible progress or pointless destruction. Tonight, I ask you to choose greatness." [to choose me]
"Victory is not winning for our party. Victory is winning for our country. Embrace the boundless potential of cooperation, compromise and the common good. An economic miracle is taking place in the United States and the only thing that can stop it are foolish wars, politics, or ridiculous partisan investigations.
"If there is going to be peace and legislation, there cannot be war and investigation." Time to stop the Mueller investigation now ... the obvious plea.
The biggest cheer of the day was from the newly elected women democrats dressed in white, a tribute to the suffragettes of old. When Trump boasted of his success in increasing the number of women in work in his thriving economy, Nancy Pelosi pointed to the left in Congress. The ladies rose as one, evidence of the President's achievement ... more women in work, in opposition to the Trump administration. USA, USA, they chanted, "You weren't supposed to do that" said the President. Not for the first time he had missed the point ...
That's all for this week, have a great week-end. 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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