Claim OwnershipThe Saturday Economist Live
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Updates on the UK and World Economy from The Saturday Economist Team ... we always keep you in the picture ...
Welcome to our podcast.Here we explore the fascinating and ever-changing world of money, markets and economics. Each episode, we bring you insightful presentations, covering topics ranging from macroeconomics to global trade, financial policy, and economic trends. Whether you're a seasoned economist or simply curious about the forces that shape our financial world, our podcast has something for you. So sit back, relax and join us as we dive into the fascinating world of economics.
Welcome to our podcast.Here we explore the fascinating and ever-changing world of money, markets and economics. Each episode, we bring you insightful presentations, covering topics ranging from macroeconomics to global trade, financial policy, and economic trends. Whether you're a seasoned economist or simply curious about the forces that shape our financial world, our podcast has something for you. So sit back, relax and join us as we dive into the fascinating world of economics.
49 Episodes
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Chicken and Chips ...
No Chicken in Nando's, No Chips at Nissan, No shakes at MacDonald's. Empty shelves are increasing. The head of the Co-Op said food shortages were the worst he has ever known. Evidently not a war baby, CEO Steve Murrells announced the group was reducing some ranges. The ability to get food into stores was hit by post Brexit migration rules and Covid challenges.
This week, once again, the car industry reported production difficulties. Output fell by 37% last month. It was the worst July performance since 1956. Manufactures "grappled" with the global shortage of semi conductors.
Taper Tantrum
Markets awaited with interest the update from Fed Chair Jerome Powell this week, at the Jackson Hole virtual symposium. The central banker hinted the Fed could start scaling back stimulus this year. The inflation surge is expected to be temporary. There was no prospect of a rate rise anytime soon but some tapering of asset purchases could begin before the end of the year.
Central Bankers came under increased pressure this week as inflation levels continue to rise. Jerome Powell, Chair of the Federal Reserve admits to being "uncomfortable" about the level of price increases.
“This is a shock going through the system associated with reopening of the economy, and it has driven inflation well above 2%. We’re not comfortable with that,” Mr. Powell told the Senate Banking Committee on Thursday. CPI Inflation hit 5.4% in June.
In the U.K. inflation CPI basis increased to 2.5% in June, the Bank expects levels to rise to 3% before returning towards the 2% target later this year. Not all members of the MPC are in agreement.
Dave Ramsden thinks inflation could hit 4% before falling back to target. He thinks conditions are such, a tightening in policy may be required somewhat sooner than he had previously expected.
Michael Saunders, in his "Inflation Outlook Speech" this week, explained, "In my view, if inflation indicators remain in line with recent trends, it may become appropriate fairly soon, to withdraw some of the current monetary stimulus.
Recovery on Track Despite Market Wobbles ...
Finals weekend at Wimbledon and Wembley, a great couple of sporting days ahead. Is it really coming home on Sunday! Let's hope so. We wish the England team well, as they put an end to all those years of hurt!
Markets wobbled mid week. The ebb and flow of fortune on court, always evident in the markets. The Dow closed down below 34,200 on Thursday, before closing at a new record high at almost 35,000 by the end of the week.
Don't Worry About Rising Debt ...
Phil Aldrick reports of a mugging in Downing Street this week. The Chancellor received help from Treasury and the OBR to convince the Prime Minister it was time to dig up the magic money tree in the rose garden.
Within days, Sunak was warning of a possible end to the triple lock, an end to furlough scheme and an end to the universal credit coupon. No money for the Biden's Global Belt and Braces initiative, money had to be found for building batteries in the UK. JKA
Inflation Alarmism Could Kill Off Recovery
The Governor of the Bank of England Andrew Bailey warned this week of "Inflation Alarmism". Prices are on the rise. House prices increased by over 11%. Haribo deliveries are failing, for a lack of lorry drivers. Construction costs are rising at the "drop of a hat". Quoted prices are good for just 24 hours. A shortage of materials is compounding pricing dilemmas in the building industry.
Rising Oil Prices Could Kill Off Recovery
In our "What next for oil prices", published in May we expected oil prices Bent Crude basis to average $66 dollars in the third quarter of the year. Prices closed last week at $76 dollars. The OPEC delay to any decision on output increases didn't help. The US administration is voicing concerns as the market tests the $75 dollar level. OPEC concerns rise as fears of "Demand Destruction" loom as prices rise.
Borrowing Falls ...
Latest figures confirm borrowing will be much lower than expected at the start of the year. In March, the OBR were forecasting borrowing of £234 billion in the current financial year. The strong bounce back in the economy suggests public finances are in much better state than expected.
Bank Holds Rates ...
The Bank of England Monetary Policy Committee voted this week to keep rates on hold and to maintain the existing target of UK government bond purchases at £875 billion. The bank continues to hang on to the £20 billion of corporate bonds picked up in the Brexit drama five years ago. The logic of the bond acquisition elusive, the language of the government bond purchases now excludes "QE". JKA
The Dow closed down, the dollar moved up. Ten year bond yields moved higher by just three basis points. Not much of a taper tantrum, more of a milk shake than an earthquake. The Fed announced the policy decision mid week, effectively to do nothing.
It wasn't really making any changes. There would be no increase in base rates. The asset purchase program would continue at an eye watering $120 billion dollars per month. No real concerns about inflation. It remains always and everywhere a transitory phenomenon.
JKA
Official data from the ONS this week revealed "the economy is hotting up". UK GDP is estimated to have grown by 2.3% in April, as government restrictions continued to ease. Compared to prior year, the economy grew by 28%. Construction activity was up by 80%. Manufacturing output increased by 40%. Service sector activity increased by 30%. The increase in the service sector was driven by a surge in retail expansion with strong growth in education, accommodation and food. Construction activity slowed slightly in the month. Developments in the service sector were faster than expected. The service sector expanded by 3.4%
Great headlines from the Times this week. "The economy is growing at an eye popping rate". "Construction growth is going through the roof". "Manufacturing leads strong performance", "Red hot economy lifts markets, ".
This is the week of the IHS Markit / CIPS UK PMI® data series. Hang on to your hats and cling to your eyeballs. Manufacturing surged to a record high in May, as new work intakes increased at a record rate. In construction, new orders increased at the fastest rate since the survey began in April 1997. In the service sector output growth increased at the fastest rate since May 1997. JKA
This week, Joe Biden announced his £6 trillion dollar budget. The President is committed to an expansion of support for infrastructure, education and the social safety net.
Questions are asked, "Where does the money come from?" "Do budget deficits matter any more?" "What will happen to inflation?" Is there a risk of hyperinflation" "Will Interest rates have to rise?"
JKA
Retail sales jumped by over 9% in April as masked shoppers returned to the high street. Sales were up 40% compared to April last year. Sales were up by 12% compared to pre pandemic levels in the months of 2019.
Clothing stores were major beneficiaries. Sales volumes increased by 70% compared to prior month. Household goods sales jumped 10%. Furniture sales leapt by 30% as showrooms reopened. Electricals were up by 29%. Sales of cosmetics were up by 25%. DIY and garden centre sales were down. Shoppers had other, JKA
Andy Haldane Chief Economist of The Bank of England was writing in the Daily Mail this week. "A year from now, it is realistic to expect growth to be in 'double digits' such will be the tennis ball bounce in the UK economy". Really? Check this out ... JKA
The Bank of England revised up its forecast for the UK economy this week. Growth of 7.25% is expected in the current year. In February growth of just 5% was anticipated. The success of the vaccine program, pent up demand amongst households, gross savings and the extension of measures to protect jobs and businesses, improved the outlook for the current year. JKA
Forecasts of growth in the UK are being revised up. The EY ITEM Club joined the 6% club last month, projecting growth of 6.8% this year. Bloomberg and JP Morgan revised growth forecasts to 7%. The latest estimate from Goldman Sachs suggests growth of 7.8% is possible, outpacing the USA in 2021.
JKA
Surfs Up ... Drop In ... Pull In ... Kick Out
The UK Economy is bouncing back from the coronavirus. Businesses are ready to shoot the curl! Surf's Up! It's time to Drop In, Pull In, Kick Out and enjoy the ride.
We expect the economy to grow by 6% this year and by 11% over the two year period. In nominal terms the economy will grow by over 20% over the next three years, providing strong support for businesses and jobs in the process.
Interest rates will remain on hold. Monetary policy will continue to be expansive. Fiscal policy will remain neutral. Even the so-called zombie companies will benefit from high levels of forbearance and debt erosion.
China's economy surged by 18.3% in the first quarter of the year. The growth rate was the highest recorded since records began. The year on year comparison was impacted by the near 7% drop in output in the first quarter of 2020, as Beijing reacted to the Covid pandemic with a shut down of large parts of the economy.
For the year as a whole, most analysts, including the IMF, are forecasting growth in China of 8.5%, compared to 6.5% in the US and perhaps 6% in the UK.
In the US, prospects for the year are improving. Economists believe the economy is on the edge of a major boom that could last into 2023. A period of supercharged growth is beginning. Expansion is manifest in surging consumer spending and increasing demand for skilled workers.
Jamie Dimon CEO of JP Morgan believes the boom could last well into 2023. "All the spending [from government and households] could extend well into 2023". The IMF has upgraded forecasts for the US economy to almost 6.5% this year. The Federal Reserve is forecasting growth of 6.5% slowing to 3.3% in the following year.
So what of the UK?
Check out the podcast or view on line ... @ The Saturday Economist
Get Ready For The Post Pandemic Boom ...
The IMF now sees a brighter outlook for the world economy. The Bank of England is feeling more optimistic about the UK. The Office For Budget Responsibility forecasts real growth of 11% over the next two years. In nominal terms the UK could grow by over 20% over the next three years, underpinning growth for jobs and business in the medium term.
In the USA Forecasts for Growth Are Increasing ...
In the US forecasts for growth are increasing. The Bank of America is forecasting growth of 6.5%. The BoA has become more convinced, consumers will get out and spend, as the $1400 dollar stimulus cheques drop through the letterbox.Biden's $1.9 trillion spending plan has passed through Congress. Next up the $2 trillion dollar plus infrastructure plan.
"Get Out There and Spend" Says The Chancellor ...
Retail sales "bounced back" after a dismal start to the year, according to the headlines in The Times today. Sales increased by 2% in February compared to prior month. Not much of a bounce back really. Sales were down by almost 4% compared to prior year. Exclude petrol and other fuels and overall sales, were down by just 1%.
The Chancellor is urging people to "get out there and spend". "Go have fun and spend money". Shops are due to re-open on the 12th April. Rishi Sunak said, people should "do their bit" by spending savings they had built up during the lock down.
In the US Joe Biden is Walking The Washington Line against China ...
Joe Biden held his first press conference this week. China featured. "I will save the world from an over mighty China" vowed the President of the United States. Working with other democracies, Biden committed to ensure China does not achieve global domination during his presidency. He may even run for a second term, to hold things up, if necessary. No cold war in prospect ... Biden is walking and talking the Washington line ...
In The UK, Recovery May Be Faster Than Expected ...
"I am more optimistic" says Governor ... No rise in base rates this week. The MPC voted unanimously to maintain Bank Rate at 0.1%. The target for government bond purchases was maintained at £875 billion. The corporate bond stock was on hold at £20 billion. The total target stock of asset purchases remains at £895 billion. Just as well really. Total government debt increased to almost 98% of GDP. The quantum of solace hit £2.13 trillion. Not long before the Chancellor will have exhausted, his first trillion pound bank note.
The Fed is Topping Up The Punch Bowl and Handing Out The Spliffs ...
In the US this week, the Federal Reserve held rates and vowed to maintain the momentum of the asset purchase plan. The Fed will continue to increase its holdings of Treasury Securities by $80 billion dollars per month. $40 billion remains the monthly budget for mortgage backed securities. The "accommodating" stance of monetary policy will be maintained until "substantial further progress has been made towards the committee's maximum employment and price stability goals."
Economic Output Drops In January ...
Economic output fell by 2.9% in January, as lock down returned to the UK. The month on month comparison was better then expected by many. Better than expected according to forecasts from the Bank of England. The Bank had been braced for a 4% setback, in the quarter as a whole.
$1.9 trillion Stimulus Approved ...
On Wednesday, the "House" passed the "American Rescue Plan". The $1.9 trillion stimulus to the US economy is valued at almost 10% of GDP. The legislation will send $1,400 dollar checks to most Americans, with additional household spending on unemployment insurance and child support.
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