the economy - update

[steveo]

Leave it

[uncleglen]

Lordship keeps changing his tune because there are too many variables and his punch line is always a massive dig at the Brexit situation.....

[Lordship 516]

uncleglen Wrote:

-------------------------------------------------------

> Lordship keeps changing his tune because there are

> too many variables and his punch line is always a

> massive dig at the Brexit situation.....

No change to my tune ...& yes, there are too many unknowns & variables with little coming from the government to define anything, so almost impossible to compute. All we can do is try multiple scenarios & be prepared as little snippets fall from the government tables.

...& Brexit is the main influence on the block...so we have to use it as a reference, mostly negative at the moment.

See how it goes over the next year - not good...& all because of Brexit.

May got her response last night .. indifference from the 27 PMs in regard to her little declaration.

All very polite & friendly but any of the 27 can veto the UK proposals so hard brexit is most likely.

Basically the government are negotiating with themselves at the moment - no progress or even any attempt at prognosis.

[Loz]

I think there was a great demonstration this week of what the UK faces... Canada spends 7 years negotiating a trade deal with the EU and it all looks like collapsing due to opposition from part of Belgium.

Just shows what might be achieved in the two years Article 50 allows.

[????]

...you could argue it's a great demonstration of what the UK has escaped Loz. The negativity is unbelievable and I'm a remain voter. Half the leaders at that summit who 'snubbed' May won't be there for the negotitaions as their voters will have bunged them out. It's all a bit of a mess but if you don't think the EU is too you're pretty delusional (too)

[????]

Bond markets - corporate finance - Europe needs London or it will be New York controlling it all and looking at sclerotic low growth Europe and saying, nah, our money's going elsewhere ...The City has more people commuting into it on a daily basis than the entire population of Frankfurt. We'll be alright......after some uncertainty.

Some clearing may, may go to Europe - that's not a big deal.

Not being in the Euro was going to make the City a backwater back in the day according to the normal suspects....

[????]

So, this morning.

Quarterly GDP growth (proper first quarter read post-Brexit)= +0.5% above consensus (+0.3%)and way above the pre-referendum Treasury prediction if Out won (-0.1%)

And, Nissan announces new models to be made in UK despite Brexit vote.

Not so bad SO FAR

[Loz]

I think we're in a bit of a funny period at the moment, all caused by the falling pound.

I'm working in retail and, due to the pound's value, we are getting a lot of enquiries from abroad as our prices are currently very attractive internationally. We know that this is a temporary period as we are selling stock bought pre-pound crash. Come the new year we are going to be hit with price rises due to rising import prices which we will pass on.

I think manufacturing is in a similar zone. Export prices are currently good, but raw material prices will rise soon.

New year is going to be... well... interesting.

[DovertheRoad]

I agree with your gut feel there Loz. Its ay too early to call impact either way. But two things for Joe public I'm fairly clear on:

- the pound is unlikely to get back to old levels vs USD for a good few years unless we get a temporary repreive from shock Trump win. Holidays will be expensive for a while yet.

- Your house/flat in London that made you feel rich was already over inflated and in bubble territory. It's market price is much more likely to fall in real terms over the next 3-5 years. If that matters to you sell now when prices are still high if you can or wait 5 years min.

Material price rises will kick in next year. That surely has to mean inflation and interest rate rises=housing market suppressed. But perhaps better overall conditions for savers after the pain passes.

This will be a long haul now...perhaps another new ten year cycle...very depressing.

[rendelharris]

???? Wrote:

-------------------------------------------------------

> So, this morning.

>

> Quarterly GDP growth (proper first quarter read

> post-Brexit)= +0.5% above consensus (+0.3%)and way

> above the pre-referendum Treasury prediction if

> Out won (-0.1%)

>

> And, Nissan announces new models to be made in UK

> despite Brexit vote.

>

> Not so bad SO FAR

The Nissan news, whilst welcome, is at present only preserving jobs, not creating new ones, and they appear only to have agreed to stay on the basis that the government has, in some way which isn't entirely clear, promised them that their business won't be adversely affected by Brexit.

Not so bad so far...we're still members of the EU and in the free trade agreement, we won't see the true effects until we're out, whether good or bad. There was an economics professor on WATO yesterday who described the news as "rear view mirror figures - we can see where we've been but they don't show us where we're going."

ETA: Kallum Pickering, senior UK economist at Berenberg bank, said the resilient post-referendum performance ?does not say anything about the UK?s ability to perform outside of the EU?.

He said: ?The good quarter of growth merely reflects the momentum heading into the vote and the healthy underlying fundamentals after some three years of good growth. The data does not alter our long-term view that Brexit will lower UK trend growth, to around 1.8% from 2.2% per year, via less trade, migration and investment with its major market, the EU.? (Guardian)

[jaywalker]

According to The Times this morning the guarantees (secret but made in writing) are likely to have promised UK government subsidies for any tariff costs Nissan has to pay on their car exports from the UK post Brexit (an event that is still two years three months away). If we have to leave the customs union (after hardball by EU leaders and Belgian citizens) then that is quite a promise.

Or is this a case of 'hard exit' talk and 'realistic exit' action? With the swivel-eyed section of the Tory party haven taken over the asylum I suspect its just desperation.

In any case, it won't be the fiscal state of this government that is blown apart by what will have to be more and more of such promises now the precedent has been set, but of the next.

[????]

I'm more worried about the fiscals state of future governemnts because 'austerity' or, as realists call it, 'attempting to live within your means' has been put on the backburner by the new PM leaving us with the 2nd highest defeceit in the G8 and the tax take for last month was well below expectations - we better hope people want to still keep lending us money but our bond rates are edging up. Need that money tree soon or we are going to have to go back to 'austerity' some point soon.

I'd be reasonably optimistic on car tarrifs - the FS and other services are the ones that worry me more but 'orrible bankers' etc etc etc

The negative view about our ability to negotiate/the strength of our position and some positives that can be taken from Brexit in terms of business is just a bit grindingly depressing and thoroughly predictable from the usual suspects.

[????]

Plus the 'fact' that the EU are a universal aligned negotiating titan set on punishing us - for somewhere like Ireland we are vitally important to their economy and they won't want our economy sabotaged by Hollande's (Fr president not country) domestically focused anti-english 'hard ball'. Southern Italy won't want 100,000 young people returning and added to their horrific youth unemployment because the UK is put through the wringer by some unelected alcoholic in Luxemburg who thinks we are traitors. Compromises will be made......other events will intervene...etc

[DovertheRoad]

"Southern Italy won't want 100,000 young people returning and added to their horrific youth unemployment because the UK is put through the wringer by some unelected alcoholic in Luxemburg who thinks we are traitors."

This is great.

[jaywalker]

???? I think that could work both ways. If the EU is as disunited as you say then them reaching what has to be a unanimous agreement on the article 50 terms looks like a pipedream. The legal side is clear: no unanimity no agreement and the UK just ceases to enjoy EU membership (free trade, customs union, everything) like it or not. For sure, some countries will want to be tender-minded, others tough: but it only takes one country to scupper the entire deal.

As for the fiscal side, as you say it is out of control already. So an avalanche of promises to keep foreign companies here looks time inconsistent. With rising public borrowing it won't take much to provoke a sterling crisis, then rates shoot up and the government panics before a general election - prints money to avoid spending cuts. The soft side of the tory party always go for this. Add the not improbable rise in the oil price by then and ...

Meanwhile BBC just running news update on marmite: the price has shot up by 12.5% at certain outlets (those of us who are wise virgins got stocks in a while ago, it has a shelf life of a couple of years). As Blair (wow, can I really be becoming a Blair supporter) says - perhaps there should be some mechanism for people to express regrexit.

[Lordship 516]

Quids

"..... 'austerity'...has been put on the backburner by the new PM leaving us with the 2nd highest defeceit in the G8"

The current status is a result of Osbornes policies - Not May & Hammond. Public finances were coming in below expectation even before the referendum & are likely to further deteriorate over the next 4 years as evidenced in the recent reported poor tax-take last month. Hammond inherited the current public finance deterioration from Osborne who conveniently slipped out the back door physically & metaphorically before the chickens came home to roost.

Hammond will deliver his views & budget on 23rd November & he is expected to say that there will be a 'gap' in public finances in the order of about ?20billion per year for the remainder of this parliament He is likely to suspend Osborne's austerity gig but only to either 1] extend the timeframe for 'balancing' the budget or 2] to separate the current budget balance requirements from investment requirements. If he does that he can have a significant surplus in the current account but can let the borrowing requirement for investment to overrun, particularly for productive purposes & stimulate much needed economic activity - a prime objective of the current administration.

The headroom created in scenario 2 will enable him to fund reversing the social security cuts that are set harming low-income families - another objective of the government. Scenario 1 is not a reasonable option as it will result in tax rises and/or spending cuts in the years after 2021 - not something he will want to embark on.

Any plan that he might propose will have to factor in the various negative effects from Brexit that will occur over the next four years & that is by no means easy for the Treasury or anyone to predict. Budgets will be very variable for the next few years. It is unlikely the Tory toffs will get their tax cuts this parliament - if he does cut taxes [except for lower paid] then this will be an act of vandalism.

[DovertheRoad]

I'm scared.

[malumbu]

Fascinaing reading, and has got my head out of the sand, briefly.

So perhaps most agree we have gone from a relatively stable and reasonably strong position to short, medium and probably long term instability. And it may take a generation to sort out and realise benefits?? When if I am still alive I can sit back in my bath chair and observe.

I'm probably stating the obvious. Right, head going back in the sand "nah nah nan I'm not listening, not listening.

Please don't respond to this post, leave it for the more informed discussion.

[rendelharris]

???? Wrote:

-------------------------------------------------------

> Plus the 'fact' that the EU are a universal

> aligned negotiating titan set on punishing us -

> for somewhere like Ireland we are vitally

> important to their economy and they won't want our

> economy sabotaged by Hollande's (Fr president not

> country) domestically focused anti-english 'hard

> ball'. Southern Italy won't want 100,000 young

> people returning and added to their horrific youth

> unemployment because the UK is put through the

> wringer by some unelected alcoholic in Luxemburg

> who thinks we are traitors. Compromises will be

> made......other events will intervene...etc

Quids, you seem to strangely neglect the fact that any exit deal agreed with the UK will have to be agreed upon by every member state. it's fine to say this nation and that nation will have this and that reason to be lenient, but all of them? I think you're also underestimating the desire of the big beasts to punish the UK exit: from what I've read Germany, to take just one nation, will be prepared to take an economic hit if it means showing that member states can't just waltz out and keep the advantages of being an EU member.

[????]

So which way is it Rendel? - it has to be agreed by everyone (so includes say Ireland - who won't want us punished) or actually just Germany & France willing (maybe) and capable (probably ) of taking that hit, in contrast?

You are arguing both sides of a coin - the fact that everyone has to agree potentially plays to 'our' advantage too. There will be compromises is my hunch.

Lordship - couldn't agree more RE Osbourne responsible missing his targets but shows how difficult it is..the main reason targets have been missed is that tax take since the recovery have been below expectation...but in my opinion that's the norm in modern economies and us (and other countries) need to adjust our public spending accordingly - which means redesigning the welfare state (and i mainly mean pensions) and the NHS. But the belligerent small 'c' conservatism of their 'guardians' make this nigh on impossible - i fear we'll go bust somewhere down the line with most other european nations. No-one wants to take their medicine.

[jaywalker]

???? Wrote:

-------------------------------------------------------

> So which way is it Rendel? - it has to be agreed

> by everyone (so includes say Ireland - who won't

> want us punished) or actually just Germany &

> France willing (maybe) and capable (probably ) of

> taking that hit, in contrast?

>

> You are arguing both sides of a coin - the fact

> that everyone has to agree potentially plays to

> 'our' advantage too. There will be compromises is

> my hunch.

???? I know I am dense and often misread your posts, but I really do not understand this at all. Of course there will be negotiations and attempted compromises after article 50. But Rendell makes the key point: try compromising when the many countries are themselves not one. So we will be going into a one way street when article 50 is triggered (there is no clause for reversal) where the outcome will be decided on whether the many EU countries agree to what May thinks she can satisfy Parliament (or perhaps just the electorate given that she seems no longer to believe in representative government) with. That does not look like a betting proposition to me, does it really to you?

[rendelharris]

???? Wrote:

-------------------------------------------------------

> So which way is it Rendel? - it has to be agreed

> by everyone (so includes say Ireland - who won't

> want us punished) or actually just Germany &

> France willing (maybe) and capable (probably ) of

> taking that hit, in contrast?

Well I'm sure you're spot on about Ireland, but the point I was trying to make is that it only takes one member state to veto any deal and the deal cannot be approved; from my admittedly limited knowledge I'd say it's more than likely that France, Germany and others will be prepared to veto and take any hit on their economy pour encourager les autres.

[????]

Germany will use an EU veto 'pour encourager les autres'! You are the ghost of Nicholas Ridley and I claim my ?5 - of course they wouldn't, the eurosceptics of the EU would go ballistic and this would fuel their anger and put the whole 'project' in jeopardy - the Germans are far too pragmatic and involved in Realpolitik for such destructive 'gallic' type gesturing. There's lots of positioning going on pre-negotiations; there's lots of rhetoric aimed at domestic electorates - they are just politicians after all - the outcome will be a compromise in the end.

[Henry_17]

?,

Not to mention that one reason the posturing is particularly animated is the upcoming election schedule; France and Germany, then Italy, which creates a reasonable chance that negotiations will be being made with increasingly eurosceptic / sympathetic counterparties.

[????]

This week:

UBS - keeping head office in London 'no plans on moving'

Google - confirm new European HQ in Kings Cross

Yesterday - inflation below expectation

Today - retail sales at their highest growth in 14 years, way above expectation