The UK economy expanded at a slightly faster rate in the three months to August. Growth was 1.5%, up from 1.2% in the first quarter of the year, according to the latest ONS monthly tracker,. Construction output was flat. Manufacturing output was up by 1.3%. Service sector growth increased by a modest 1.6%.
For the year as a whole, we expect the economy to expand by 1.4% or 1.5% at best in the absence of any major data reviews.
This week, Jaguar Land Rover announced a two week shut down following a sales slump in the UK and overseas markets.
Britain's largest carmaker will close its Solihull plant for two weeks later this month, following a near 50 percent fall in sales to China. China's automobile sales have been falling in recent months. Sales fell by 12% in September. It was the third consecutive month of falling sales. For the first time since the 1990s, the industry may experience a drop in car sales year on year. The economy is slowing. Trade frictions are making consumers cautious about spending on big ticket items
In the UK, new car registrations fell by 20% in September. Diesel sales were badly hit. New regulatory requirements hit availability in the month. The impact on manufacturing in the sector and related industries may impact on third quarter growth overall.
As fears over Brexit increase, manufacturers may seek to augment stock levels of raw materials and components to offset continuity of supply risks in the short term. The impact on growth is expected to be minimal in the short term. Any impact on output would be largely offset by a deterioration in the trade deficit.
IMF issues world trade warning ...
The IMF has cut it's growth forecast for the US next year, warning that Trump’s protectionist trade policies will harm growth domestically and around the world.
In the World Economic outlook, released Monday evening, Global growth is expected to be around 3.7% for 2018/19 down from an earlier forecast of 3.9% just a few months ago.
The U.S. economy is expected to grow 2.9 percent this year and 2.5 percent next year. In April, the IMF forecast the U.S. economy would grow 2.7 percent in 2019.
“If you have the world’s two largest economies at odds, that’s a situation in which everyone is going to suffer,” said Maurice Obstfeld, chief economist at the IMF. The IMF also reduced its growth forecast for China next year to 6.2 percent because of the trade war.
The IMF repeatedly singled out Trump’s trade actions as disruptive to global growth and prosperity, especially the imposition of tariffs on roughly half of the goods that the United States imports from China.
The US trade deficit with China is increasing despite Trump's tariff war. China enjoyed a record high $34.1 billion trade surplus with the United States in September, taking the surplus for the year to date to $225.8 billion. That’s significantly higher than the $196 billion recorded between January and September last year.
Trump keeps and eye on crazy Fed ...
Trump has been outraged by the actions of the Federal Reserve blaming Fed Chair Jerome Powell for causing the turmoil in stock markets around the world. According to the New York Times this week ...
"President Trump responded to falling stock prices on Thursday by continuing to throw rocks at the Federal Reserve. He described the Fed as “crazy,” “loco,” “going wild” and “out of control” for slowly raising interest rates against the backdrop of a booming economy."
No other modern president has publicly attacked the Fed with such venom or frequency but someone has to take the blame. Trump has been riding the economy hard, bragging about job creation, tax cuts and reduced regulation, and claiming credit for the rise of the stock market. Now that the market has lost 5 percent of its value in the last week, Mr. Trump is insisting someone else is to blame.
The American economy continues to grow, prompting the Fed to raise interest rates and drawing the president’s anger. The Fed’s chairman, Jerome H. Powell, has said that the economy is in a “particularly bright moment”. He sees no clouds on the horizon.
Despite the criticism, Trump has said he doesn't want to fire the Fed Chair. It is not even clear if he could. Markets would react badly to any move to politicize the central bank. The Federal Reserve Act of 1913 established the Federal Reserve as the central bank of the United States to provide the nation with a safer, more flexible, and more stable monetary and financial system. "Safe in their hands" is not a mantra one would associate with Trump in control ...
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 ...
Plus! Don't Miss the pro-manchester economics conference on the 18th October. I shall be anchoring the "show" and providing an update on prospects for the UK and World Economy. Book Now We have great agenda and line up of speakers on the day as we discuss the "Economics of Greater Manchester".
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for FREE weekly updates on the UK and World Economy.
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.