Just a few days to go before the critical vote in parliament. Theresa May's Brexit deal will be put to the Westminster elite on Tuesday. Junior ministers were sent out on a roadshow this week. The objective? To convince the party faithful of the merits of the deal. Time well spent? Not really.
A survey of 1,262 Tory members taken on Thursday, suggests 72 per cent reject the deal. They would like their MPs to do the same. Just 26% are in favour. It doesn't look good. Worse still, 62% think the Prime Minister should resign if the vote goes ahead and the deal is lost.
Time and effort would have been better spent dealing with Tory dissidents and the DUP perhaps. MPs have been surprised by the lack-lustre effort of the whips in the house. Perhaps their hearts are not really in it. Graham Brady, Chair of the Back Bench committee tried to persuade the government to postpone the vote on Tuesday. A crushing defeat is the likely outcome. The government is committed to the timeline, warning of chaos at the ports and rationing of medicines if a hard Brexit ensues.
The deficit could be as many as one hundred votes against, as Tory Brexiteers and Remainers unite with the DUP. A heavy defeat could lead to an end to May as Prime Minister, an end to the Tory government, a general election and the option of a Corbyn administration in power. Or we might even see a second referendum as MPs seek guidance and direction for the next big move,
MPs are already hatching a plan, to dump May if the vote is lost this week. Labour will join with Tory dissidents and the DUP to bring about a vote of no confidence. Boris Johnson, may yet have another tilt at the Downing Street Windmill. Just one vote, that's all it takes ... rivals will get chance to sip from the poisoned chalice. The challenge ... to unite the Conservative party on Europe ... well good luck with that ...
House Prices Falling ... ?
House prices increased by 0.3% in the year to November according to the Halifax Building Society. Russell Galley, Managing Director, explained, "Although this is the lowest rate for six years, the outcome is within the expected 0% to 3% band for the year as a whole."
Should we worry about the housing market? Not really. As earnings rise and house inflation slows, affordability is increasing. High employment, wage growth and low interest rates continue to underpin the market. In the three months to October, house sales were up by 2.4%. Mortgage approvals increased by the highest level since the start of the year.
According to Nationwide, house prices increased by 1.9% up from 1.6% in October. Expectations remain of further growth in activity and prices next year. Concerns over Brexit cast aside for the moment. No need to worry about the 30% drop conditioned into the Bank of England stress test at all.
Car Sales Falling ... ?
Car sales last month were down by 3% on prior year. For the year as a whole, registrations were down by 7%. We expect total registrations to fall to 2.37 million from 2.54 million last year. Diesel remains the big story. Diesel sales were down by 30% in the first eleven months of the year. Petrol sales were up by 9% and alternative fuel vehicles were up by 22% taking a 6% market share.
This year was not really about economics, it was the story of a market in transition. As Mike Hawes Chief Exec of the SMMT explained, "Model and regulatory changes conspired to affect supply and demand in 2018. The good news is that, as supply constraints ease, and new exciting models come on sale in the months ahead, buyers can look forward to a wide choice of cutting-edge petrol, diesel and electrified cars."
"It’s now critical that a Brexit deal is secured to boost consumer confidence and provide a stimulus to the new car market as we enter the New Year." A yes Brexit, just one vote, that's all it takes to boost confidence in the car market.
And what of growth ... ?
We normally follow the market in housing and motors to understand the direction of travel and momentum for the economy as a whole. Despite the fears over Brexit, the UK is expected to grow by 1.4% this year and next. In the EU, the latest data suggests growth of 2% in 2018 and a similar level in the following year. In Poland and parts of Eastern Europe the EU will grow by an average 5% this year and next.
In Ireland the economy is expected to grow by almost 10%! That's better than any BRIC and we know how to trade there. Lots of growth in our biggest trading block. Just one vote to remain in the customs union and the Free Trade Area ... you know it makes sense ...
"Stop calling John Kelly ..."
Market turmoil continued this week. The Dow fell by over 500 points wiping out gains for the year. Apparently, Trump is beginning to think he could be part of the problem! According to a CNBC report this week, Trump is glued to the television and the stock market fluctuations. He is asking advisors if the tariffs he has been imposing on China may have contributed to market unrest over the last two months. Imagine!
The self described "Tariff Man" could be having second thoughts about his trade policy, if indeed there is such a thing. Someone should explain, arresting a senior exec from Huawei on the Canadian border, won't ease relations with Shanghai.
Rex Tillerson former Secretary of State, explained life in the White House was difficult, “It was challenging for me coming from the disciplined, highly process-oriented Exxon Mobil Corporation to go to work for a man who is pretty undisciplined, doesn’t like to read, doesn’t read briefing reports, doesn’t like to get into the details of a lot of things, but rather just kind of says, ‘Look, this is what I believe,’” Tillerson explained in a discussion with Bob Schieffer of CBS News. "Trump would get frustrated when he could do something which was illegal!" It had never stopped him before, as the Mueller investigation will expose.
Trump took it all in his stride "“Mike Pompeo is doing a great job, I am very proud of him,” Mr. Trump wrote on Friday afternoon, referring to the current secretary. “His predecessor, Rex Tillerson, didn’t have the mental capacity needed. He was dumb as a rock and I couldn’t get rid of him fast enough. He was lazy as hell." Dumb as a rock and lazy as hell! It was time for the Exxon exec to exit.
Soon too the time for John Kelly to move on. He probably won't make it to carol singing in the Oval Office this year. "Stop Calling John" the President instructed staff this week. An ominous line! He has already lined up his successor. Nick Ayres, the Mike Pence top aide is the likely replacement.
The Mueller investigation is closing in. The latest revelations, show that nobody can save Trump. Meanwhile the trade deficit is increasing, inflation is set to rise, the fiscal deficit is rising to $1 trillion dollars. The overall debt is set to increase over 100% of GDP. The White House is not concerned. "It will only become a big problem, long after I have left the White House", the President explains. It could be sooner than you think!
That's all for this week, have a great week-end. Don't Miss Our Monday Morning Markets ... we expand further on market moves ... and assess the fortunes of our "Empires of the Cloud" tech fund ...
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for FREE weekly updates on the UK and World Economy.
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