Sleep is the answer ...
The government is set to offer official guidance on how many hours citizens of the U.K. should sleep every night. The suggested guide lines will vary according to age and the degree to which voters have confidence in the incoming Johnson administration.
In the event of a no deal Brexit, the guidelines will not apply to Brits living abroad or Remain voters. Matt Hancock, the health secretary is thought to be working with the Alexa app, to ensure the strict guidelines are followed in bedrooms around the country.
Macbeth described sleep as the "chief nourisher in life's feast" according to the Times today. Famously, Margaret Thatcher survived on just four hours sleep.Trump digests just three hours sleep and a packet of Provigil allegedly.
Steve Brine, a former public health minister, explained, working in government, "we are all familiar with the notion of being tired and grouchy", lack of sleep just one of many reasons. Matt Hancock is the man for the challenge. A man of conviction, Hancock was the first to jump his own ship and join the Boris bandwagon.
Hancock's planned introduction of a sugar tax on sodas and milk shakes, hit a sour note this week. Boris Johnson, declared he was opposed to the extension of any action to extend the levy. The contradiction in policy may generate sleepless nights in cabinet for the health secretary.
A man of conviction, Boris Johnson reaffirmed his commitment to leave the EU on the 31st October. Prerorgation of Parliament, sequestration of the Queen, a front with Farage, all steps will be taken to ensure Johnson secures election in the current Tory voting round.
Jeremy Hunt on the other hand, thinks Brexit will all be over by Christmas. Boris, the historian is well aware, difficulties in Europe tend to take much longer ...
Back to work in May ...
Good news on the economy this week. The car industry went back to work in May. The Brexit shutdown, over for the moment, business went back into action.
Let's not get too excited. Manufacturing output in the month was flat compared to prior year. This marked a recovery from the one percent drop prior month. In the second quarter of the year, we expect a modest fall in manufacturing output compared to prior year.
Construction output is likely to expand by 2.3% in the quarter compared to a 3% plus rise in Q1. Service sector growth is expected to rise by just under 2% in the current three months. The data suggests growth could be around 1.4% in the second quarter. A slow down perhaps but still consistent with growth for the year overall of 1.4%.
The trade deficit continues to be a problem for the UK economy. The trade deficit in goods was around £12 billion in May. £36 billion is the likely deficit for the quarter. This would be a significant reduction from the £47 billion recorded in the first quarter of the year when stock building ahead of the March 31st deadline, accelerated the shortfall. For the year as a whole we expect a deficit of over £150 billion. Leaving the EU without a deal, will compound the problem.
Boris and Brexit is becoming the major concern for voters and business. Survey data suggests investment and hiring decisions are being postponed ahead of the hurdle date in the Autumn. Trump and Tariffs, Boris and Brexit, the challenges loom large for business in the UK and around the world ...
Trump will get his rate cut ...
Jerome Powell, chair of the Federal reserve gave the clearest indication yet, base rates will be cut later this month. Trump will have his way in the development of monetary policy.
In a statement before Congress this week, Powell explained ... “Since June, uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook."
James Bullard, president of the St. Louis Fed, a dove, said, “Sitting here today I would argue for a 25 basis point cut at the next meeting,” Bullard wanted to see a cut in June but lost that fight. “I put 50 basis points worth of reductions by the end of the year. So that would mean this cut plus another one at some point later in the year.”
Powell made clear the independence of the Fed from political interference is of paramount importance. Despite intense criticism from the President, the chair made it clear he had no intention of resigning. Markets reacted with a strong Wall Street rally. The S&P, Dow and NASDAQ pushed to new highs. The Fed remit to nurture markets continues.
Powell explained, “Our baseline outlook is for economic growth to remain solid, labor markets to stay strong and inflation to move back up over time to the 2 per cent objective". The Fed is moving ahead of the curve. The twin deficits will emerge as the major problem for the U.S economy in the medium term. At that stage the need for rate hikes will become more urgent. No need to squander ammunition now.
The Fed believes downside risks to the economy have “increased significantly”. Latest forecasts suggest growth in the USA will slow to 2.5% this year, from over 3% in the first quarter of the year. Trump and tariffs the major concern. The White House may blame the Fed for the slow down. The Oval Office alone is witness to the major culprit.
That's all for this week, have a great weekend. 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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