Retail Sales Boom ...
Retail sales volumes jumped by 6.7% in March, increasing by over 7% in value compared to prior year. Shoppers were shrugging off Brexit fears, splashing the cash and flashing the cards in defiance of forecast gloom. Online sales were up by 12% accounting for almost 20% of all transactions. Clothing and footwear sales were up by over 7%.
Comparisons with prior year were distorted by the dismal performance last year. The "Beast From The East" roamed the streets in 2018. Milder weather this year and stock piling of toilet rolls apparently, may have boosted sales.
Adjusting for the low figures last year, retail sales in volume and value were up by 5% in the month and over 4% in the quarter. Spending is enhanced by a strong jobs market, low inflation and real income growth. In March CPI inflation remained below target at 1.9%. As always we caveat, goods inflation increased by just 1.3%. Service sector inflation increased by 2.5%. The service sector and producer prices indicate moderate inflation pressures remain to challenge the benign interest rate outlook later this year.
Earnings increased by 3.5% in the three months to February. Real income growth is up by 1.6%. The unemployment rate remains steady at 3.9%. The number of vacancies in the economy was over 850,000. The number unemployed was just over 1.3 million.
Consensus forecasts suggest growth of 1.3% for the year. As we explained last week and illustrated in our detailed graphic below, don't be too surprised when the mood swings to the upside as group think catches up with reality ...
Markets Rally ...
Markets rallied in the East this week. Growth in China increased by 6.4% in the first quarter ahead of expectations. In the US, the outlook for first quarter growth has suddenly shifted upwards after a series of better than expected data releases later in the quarter.
The first estimate of US GDP growth will be released at the end of the week. Market expectations of 2.3% growth will prove to be too pessimistic. Expect markets to rally and bond yields to bounce as the yield curve will gyrate to a revised forward rate curve.
The Federal Reserve came under pressure again this week. Chief Economist Trump took time out from advising the Paris fire fighters to criticise the Fed. Markets would be 5,000 to 10,000 points higher. Growth would be nearer 5% if monetary policy were to follow the President's guidelines.
Trump advised the French fire service to "act quickly" with the Notre Dame fire and "water bomb" the medieval structure. "Perhaps flying water tankers could be used to put it out" Trump tweeted. "Must act quickly" the helpful advice.
The Paris firefighters were quick to respond. "Hundreds of firemen of the Paris Fire Brigade are doing everything they can to bring the terrible Notre Dame fire under control. All means are being used, except for water-bombing aircraft which, if used, could lead to the collapse of the entire structure of the cathedral."
If only Jerome Powell head of the Fed could be so direct. Fed monetary policy was completing the departure from Planet Zirp. The seat belt signs had been turned off, the drinks trolley set to roll. A volte face by the Fed suggested no more rate rises this year. Rate cuts appeared a possibility. A bird strike was forcing the Fed to return to Planet Zirp. The intervention of the White House untimely and unwelcome. As if Trump did not have enough on his plate this week ...
Not founded on facts ...
The Mueller report was released . Partially redacted, the initial response from the President was jubilant. The Russians had interfered with the US election process. The objective, to influence the vote in favor of Trump but so what! There was no collusion between the campaign team and the Kremlin. No collusion, Trump was in the clear.
"I am f****d" Trump had said on the announcement of the Mueller enquiry. "This is the end of my presidency" he had claimed. It may well yet be. Mueller has laid out a series of revelations about clear obstruction of justice or attempts to do by the President.
The report identifies a President determined to put an end to the investigation. Trump fired FBI Director Comey. He asked for the investigation into Michael Flynn to be abandoned. He put pressure on Jeff Sessions to act to curb the theme and scope of the investigation. He tried to fire Mueller.
Attempts to scupper the investigation failed. They failed in some cases because White House staff would not execute the President's orders for fear of criminal accusation. White House counsel Don McGahn deliberately disobeyed Trump instructions fearing formal "obstruction of justice" charges. McGahn explained the president had asked him to do “crazy shit". Trump accused his counsel of taking too many notes during meetings in the Oval Office. "I have never know a lawyer take so many notes" he said.
The most concrete takeaway from the 448-page Mueller report according to Politico is the damning portrait of the Trump White House as a place of chaos, intrigue and deception, where aides routinely disregard the wishes of a president with little regard for the traditional boundaries of office. They also lie with impunity.
When Trump fired Comey in May 2017, White House press secretary Sarah Huckabee Sanders explained "Comey was unpopular in the FBI. "Countless members of the FBI had told the White House they'd lost confidence in the former FBI director" she said.
Challenged under oath during the Mueller investigation Sanders admitted the remarks were "not founded on anything" and were just a "slip of the tongue". With such unfounded lies are reputations damaged.
The Mueller report has laid out a careful trail, exposing evident "obstruction of justice" attempts by the President. It is now for the Democrats to decide if they wish to pursue the case for impeachment. The party is divided.The 2020 election is less than 19 months away. Lots of time for Trump to dig a bigger hole before the electorate gets a chance to take the option or not on "Four More Years" ...
That's all for this week, have a great Easter weekend. Enjoy the sunshine. We will be back with more news and updates next week!
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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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