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Saturday 17th June 2017
Hi Friend,
7% of Americans think chocolate milk comes from brown cows ...
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In the U.S.A. seven percent of Americans think chocolate milk comes from brown cows. Yep, according to a survey from the U.S. Dairy Innovation Center, 16.4 million, misinformed, milk-drinking people, the equivalent of the population of Pennsylvania, just don't accept the inclusion of cocoa and sugar in their basic health drink! Should we be shocked? Not really!
In the U.K. five out of eight members of the Bank of England Monetary Policy Committee think interest rates should be at 0.25%, even though inflation (RPI) hit 3.7% in May. Just three members of the MPC voted to hike rates this week, despite the fact RPI inflation hit 3.7% and the RPIX measure excluding housing costs hit 3.9%.
In the U.S inflation slipped back to 1.9% in May from 2.2% in April. The Fed hiked rates despite the fall. More U.S. rate rises are expected this year, with bond sales expected as the QE experiment ends. The Fed intends to increase rates, even though inflation is likely to be around or even below the long term 2% target.
In the U.K. headline CPI inflation hit 2.9%. Goods inflation increased to 2.9% from 2.5% last month. Inflation is spiking much earlier than the Bank expected. Manufacturing prices steadied in the month at 3.6%. Evidence of price pressures receding were inherent in the input cost fall from 20% at the start of the year, to 12% in May. "I see just blips" the likely verdict from the Governor, as the decline in Sterling and the fall in oil prices works out of the inflation rate.
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So what happened in the economy this week ...
In the U.S despite the fall in inflation, the Fed is focusing on the strength of the jobs market and the steady growth in the economy. Most analysts expect the US to grow by just over 2% this year as employment continues to rise and wage growth is muted.
In the UK, unemployment fell to just over 1.5 million at a rate of 4.6%. The levels are lower than before the great recession. Vacancies fell slightly but may be subject to upward revision. The economy is near full employment with base rates on the floor.
The Bank is reliant on the weakness of earnings to justify the accommodating policy stance on rates. Earnings growth slowed to 2.1% in April from 2.3% at the end of March. Construction earnings apparently fell in the month, having risen by over 6% in the final quarter of last year. There is something amiss in the data set. Chocolate milk from brown cows seems more plausible, than the latest batch of earnings data from the O.N.S.
For lovers of gloom, retail sales (volume) growth slumped to just 0.9% in May. Household goods stores were hit by a 6% fall in sales. Real earnings are under pressure. The income impact of slowing earnings and rising inflation was a fall of 0.6% in real incomes in April. It won't be much better in May. The good news, retail sales spending increased by 4% in the month, as money still left household pockets. Online sales increased by 15%. The outlook for the rest of the year is uncertain given the political turmoil and the start of the Brexit negotiations next week.
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Not so much a cabinet ... more a cult ...
Back in the U.S.A. ... "It's a witch Hunt" claimed the President. "I am being investigated for firing the FBI Director by the man who told me to fire the FBI Director". Tweeted Trump on Friday.
A victim of manipulation, Trump led an attack on Assistant Attorney General Rod Rosenstein. Trump faces charges of obstruction of justice having sacked FBI Director Comey just weeks ago. Never one to face up to responsibility, the President is struggling to find someone else to blame again ...
The Cabinet met last week in the most bizarre episode in White House History according to many Washington analysts. Trump set the tone, declaring himself to be one of the most productive presidents in American history — "perhaps Franklin D. Roosevelt could come close", he conceded "but then he did have a major depression to cope with". The President proclaimed he had led a “record-setting pace” of achievement despite the lack of any significant legislation through Congress to date.
No depression around the table. The Cabinet behaved not so much as a cabinet, more like a cult clinging to the leader. The Washington Post explained : One by one, they praised President Trump, taking turns complimenting his integrity, his message, his strength, his policies. Their leader was smiling, nodding his approval.
“The greatest privilege of my life is to serve as vice president to the president who’s keeping his word to the American people,” Mike Pence said.
“I am privileged to be here — deeply honored — and I want to thank you for your commitment to the American workers,” said Alexander Acosta, the secretary of labor.
Reince Priebus, the chief of staff, outdid them all, telling the president — and the assembled news cameras “We thank you for the opportunity and the blessing to serve your agenda.”
So it went on Monday in the Cabinet Room of the White House, as Mr. Trump transformed a routine meeting of senior members of his government into a mood-boosting, ego-stroking display of support for himself and his agenda. While the president never explicitly asked to be praised, Mr. Pence set the worshipful tone, and Mr. Trump made it clear he liked what he heard.
“Thank you, Mick,” he told Mick Mulvaney, his budget director. “Good job,” he told Scott Pruitt, his E.P.A. chief. “Very good, Daniel,” he said to Dan Coats, the director of national intelligence.
Reince Priebus hired a lawyer this week. The Mueller enquiry will hit all in the White House. Guilty or not, the legal fees will be significant. In Australia, Prime Minister Turnbull poked fun at the President. In Moscow Putin offered asylum to ex FBI Director Comey with more than a wry smile.
Soon perhaps, exile and asylum may be extended to the President himself ... Cuba was ruled out as a refuge this week. Obama trade deals were rescinded by the President, unless a Trump Tower receives planning permission in Havana of course.
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 ...
The Dow rallied, the FTSE fell. The Dollar softened against the Euro and Sterling despite the hike in rates. Amazon made the move on Whole Foods for $14 billion dollars. Supermarket shares took a hit. The Empires of the Cloud don't take prisoners ...
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| John
That's
all for this week. Our Economic Forecasts for June have now been updated.
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| | © 2017 John Ashcroft, Economics, Strategy and Social Media, experience worth sharing.
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