The trend of declining economic data in the UK continued over the past week. New car sales have now fallen for seven consecutive months and are mired in recessionary conditions. Britain’s construction industry is also in a recession, with output having fallen almost 1% from July to September. This followed a 0.5% decline from April to June.
As previously noted, the recent first reading of third quarter GDP came in at +0.5%, just days before the Bank of England raised interest rates for the first time in ten years. The headline figure for economic growth is literally taken at face value. Very little consideration is given to the underlying activity that encompasses gross domestic product as a whole.
Elsewhere, the author of Article 50, Lord Kerr, was speaking at an ‘Open Britain‘ event where he was perceived to have stated that the UK could still change its mind on leaving the EU. The head of ‘Vote Leave Watch‘, Chuka Umunna, later joined Kerr at a conference to discuss Brexit.
Here is an extract of what Kerr had to say:
The fact is that a political decision has been made, in this country, to maintain that there can be no going back. Actually, the country still has a free choice about whether to proceed. As new facts emerge, people are entitled to take a different view. And there’s nothing in Article 50 to stop them. I think the British people have the right to know this – they should not be misled.
Kerr’s stance of it being a ‘political decision‘ keeps the narrative within tight confines. He is viewed as the authoritative voice on the matter given it was he who conceived Article 50. By suggesting that the country has a ‘free choice about whether to proceed‘ at a time when negotiations are at an impasse creates two impressions. Firstly, that Brexit is not inevitable. And, secondly, that a weakened Conservative government is driving the country towards a ‘cliff edge‘ scenario of no deal. As the prospect of an unruly exit from the EU is stoked up through the media, the assumption that the government could still change its mind will serve to redraw the battle lines between leavers and remainers.
In reality the political process of Brexit is irrelevant. Recently I published a series of articles which re-examined Article 50 and the mechanics behind the clause. Right now it has no bearing what parliament supports or rejects in regards to Brexit. The only way negotiations can either be suspended or extended past the March 29th 2019 deadline is if the other twenty seven member states UNANIMOUSLY agree to such measures.
Political turmoil and even a rejection by parliament of a final deal on Brexit would not prevent the UK from leaving the union. Article 50 has ensured that.
- The UK construction industry has technically entered recession for the first time in five years.
- Output fell by 0.9% in July-September, according to new figures from the Office for National Statistics (ONS).
- The drop follows a decrease of 0.5% in April-June, meaning the industry has seen its first back-to-back quarterly fall in output since 2012.
- The trend is in stark contrast with the overall performance of the UK’s industrial sector, which has recorded its sixth straight month of growth for the first time in 23 years.
- The writing was on the wall two weeks ago when retail employment tumbled along with CBI-reported retail sales, but tonight’s BDO High Street Sales Tracker should be the icing on the cake for any looming rate hike as like-for-like sales crashed 5.2% – describe by BDO as “the most horrific” October on record.
- It was the worst month since right before Brexit in April 2016.
- Fashion sales plunged 7.9% YoY and were the wost segment, but retailers aren’t alone; restaurant, pub and bar groups “also feeling the pinch” in recent weeks.
- New car sales have declined for the seventh month in a row, falling more than 12% in October as worsening confidence among consumers and businesses continues to dampen the market.
- The figures show that the car market is on course for its first annual decline since 2011.
- The industry body said car registrations dropped 12.2% year-on-year to 158,192 last month – the second double-digit decline this year. It is an acceleration from the 9.3% fall in car sales in September, the first time the market had declined in September in six years. In April, sales plummeted 19.8% after an increase in vehicle excise duty.
- A gradual increase in interest rates is the best way to deal with inflation and support the U.S. economy, Loretta Mester, president and CEO of the Federal Reserve Bank of Cleveland, told CNBC Thursday.
- “I think a gradual path is the best strategy we have for prolonging the expansion,” she said.
- “Obviously we want to be responsible to changes in the economic outlook and as data comes in we are always revising the outlook,” Loretta, a non-voting member of the Fed, said, mentioning she looks at inflation and inflation expectation numbers.
- Financial institutions should prepare for the worst case – that is, a “no deal” scenario – with a disorderly exit of the UK in March 2019.
- Let me be crystal-clear. Preparations should already be well underway; if not, they must start now!
- The current negotiations must gain in speed – if the British government can find a constructive approach that unites the country and enables progress on the divorce issues, we might see substantial acceleration. But even then, it remains a highly challenging undertaking to reach an agreement in a timely manner. And let us not forget that a disorderly exit will remain an option until the very end.
- Industrial production in Germany fell short of expectations in September, official data showed Tuesday,
- Output from industrial firms in Europe’s largest economy fell 1.6 percent month-on-month, federal statistics authority Destatis said, worse than analysts’ forecasts of a 0.4-percent slide.
- The biggest fall came in the energy sector, where production was down 4.3 percent.
- In manufacturing, capital goods makers saw the biggest fall, at 2.7 percent, while there were smaller slips for firms creating producer and consumer goods.
- The picture was brightened slightly by a small lift in output for construction firms
- German imports fell more than exports in September to widen the trade surplus slightly, data showed on Thursday, leaving domestic consumption to drive growth in Europe’s largest economy.
- Seasonally adjusted exports fell by 0.4 percent on the month while imports were down by 1.0 percent, data from the Federal Statistics Office showed. The contractions came after two successive months of growth in both exports and imports.
- U.S. consumer credit outstanding rose in September by the most since November 2016 as credit-card debt exceeded $1 trillion, Federal Reserve data showed Tuesday.
- Total credit rose $20.8b (est. $17.5b) or at a 6.6% annualized rate
- Non-revolving debt outstanding climbed $14.4b
- Revolving credit outstanding increased $6.4b, the biggest gain in four months
- Lending by the federal government, which is mainly for student loans, increased by $35.2 billion in the third quarter, before seasonal adjustment
- Loans for motor vehicles rose by $19.3 billion in the third quarter
- The pickup in September consumer credit capped a quarter in which debt outstanding grew at an annualized 5.5 percent, the fastest quarterly pace this year.