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Saturday 3rd June 2017
Hi Friend,
Consumer Confidence and Construction Up in May ...
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Consumer confidence rallied in May. The GfK Consumer Confidence Survey jumped 2 points in the month. Households were more confident about their personal financial situation over the next twelve months. Spending plans were lifted despite some uncertainty about the economy in the year ahead.
Joe Staton, Head of Market Dynamics at GfK, said:
“We have an unexpected uptick in the barometer this month as consumers report increased confidence in their personal financial situation, the wider economy, and future plans for shopping and saving. Despite life becoming more expensive and wages dropping in real terms for the first time in three years, stagnant living standards haven’t yet significantly dented consumers’ spirits."
The PMI Markit surveys for Manufacturing and Construction were released this week. Manufacturing activity demonstrated further growth this month. The headline index moved to 56.7 slightly down from the April high, strong demand in the UK and export markets provided the foundation. Construction activity bounced back to a seventeenth month high. Housing outperformed. The headline construction index jumped to 56.0 from 53.1 prior month.
Most
economists expect activity to slow this year as inflation increases and
incomes remain static. Some belong to the "Vera Lynn School of economic
thought". "Recession again, don't know where, don't know when ...". Most
aren't even sure why! Consumer confidence so far into the year remains
strong, despite uncertainty about the election and Brexit. Output in manufacturing and construction remains high. The data on the service sector is due to be released next week. We expect a similar strong performance.
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Housing Market ... no slump in prospect ...
Mortgage activity eased slightly in April according to the latest Bank of England data. Is this the prelude to a slump? Not really! Analysis suggests it's business as usual in a market adjusting to affordability. Prices have risen rapidly over the past three years. Sooner or later, market reality will impact on levels of activity and prices.
Mortgage approvals fell by 2.3% compared to April prior year. For the year, as a whole we expect the volume of activity to slow from 800,000 last year to just 785,000 this year.
Prices slowed according to the Nationwide House Price Index. Prices increased by just 2.1% in the month compared to increases of 14% just three years ago. A glance at the Nationwide affordability explains why. The price to earnings ratio remains steady at 6.0. It peaked at 6.5 in 2007. The long run average is more like 4.5. House prices are high compared to current earnings. No slump in prospect. The market is adjusting to the reality of affordability.
Housing starts and completions are set to hit 200,000 this year. The government target of 250,000 units will remain elusive. Completions in 2016 were just 179,000. The market performance this year represents an increase of 12%. Housing starts last year were 195,000. Private sector housing construction is set to increase by 5% this year from £27.2 billion in 2016 to £28.5 billion. Public sector housing is set to increase by 4.5% to a level of £4.5 billion. No slump in prospect. We still expect the economy to grow by between 2.0% and 2.4% this year.
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He's Got The Whole World in His Hands ...
The leader of the free world dropped the baton this week. The decision to pull out of the Paris accord caused widespread criticism around the world. The USA is set to join Syria and Nicaragua as the only countries on the planet refusing to sign up to the climate change agreement.
Google, Apple and Facebook CEOs joined the chorus of criticism. Donald Tusk and Disney's Bob Iger withdrew from Trump advisory panels following the decision. Even the CEO of Goldman Sachs tweeted to Trump. He never tweets! Leading members of the U.S. Conference of Mayors announced they are unified in their opposition to President Trump's withdrawal from the Paris climate accord. The group affirmed their commitment to meet environmental goals, despite the
president's decision. Former New York Mayor Michael
Bloomberg committed to make good the $15 million shortfall to the UN from his own pocket, as he too made clear his views.
In Europe the G7 leaders denounced the decision. China and India vowed commitment to the cause. Europe will co-operate with China to maintain momentum. Elected by the "People of Pitsburgh not Paris" Trump made good on his election promise. Pity the people of Pitsburgh were not fully in support. Yes the people of Pitsburgh have children and grand children too.
Trump has dropped the baton and turned his back on the world. Chinese hegemony beckons. Set to overtake the US as the largest economy in the world within the next ten years, the rise of the Renminbi and the depreciation of the Dollar will front run the move. Gaining the initiative in the South China seas and now in Europe, is set to follow for the people of the Middle Kingdom.
Trump has stated the US may stay in, if a deal can be renegotiated. Difficult to renegotiate a voluntary agreement with a tough set of targets to save the planet. All eyes were on Trump this week just as planned. The President was speaking to a safe audience of flower lovers and followers in the Rose Garden, as the Grand Decision was made.
All eyes were ON Trump. All eyes were OFF the Mueller "special investigation". The subpoenas are flying, no escape for Gerard Kushner, even Nigel Farage became a person of "special interest" to the FBI. (Only in the US!). Sean Spicer became even more evasive, monosyllabic and sycophantic when pinned in the White House Press Room. His job is on the line after all!
Trump may have dropped the baton. The Master of Misdirection held the whistle. The game is not yet over. The cost to American reputation and prestige is immense. The price to pay for the President's choice of distraction is huge. Focus will return to the Moscow Mysteries ere too long. Condemnation of the Trump move will be eternal.
That's all for this week from The West Wing, Whisky, Tango, Foxtrot ... You can check out the series of blog posts here or leave any comments or LIKES on the Facebook page here ...
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The week in markets ...
Markets were confused this week. The Dow closed up as the FTSE ended unchanged. Sterling held against the Dollar, both slipped against the Euro. Oil fell and Gold rallied. Amazon closed above $1,000 dollars, Google looks set to follow, Alphabet closed at $996.12.
US job growth slowed to 138,000 in May as the unemployment rate fell to 4.3%. The Fed is set to make the move to hike rates this month. The market is now more unsure about two further increases this year.
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| John
That's
all for this week. Our Economics Forecasts for May will be released at
the end of next week. This follows the second estimate of GDP last week. Slight delay but ...
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| | © 2017 John Ashcroft, Economics, Strategy and Social Media, experience worth sharing.
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