Subject: Car Industry On Red Alert ... Brexit Deadline Looms ...

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                                                                                                   Saturday 2nd February 2019
Hi Friend,
Car Industry on Red Alert ...
Production and Investment Falls ...
The car industry issued it's starkest warning yet about the implications of a no deal Brexit. Production in 2018 fell by 9% to 1.5 million units. Investment fell by almost 50% to a level of £588 million. Almost two thirds of the UK's global car trade could be at risk from a "no deal scenario". UK companies are urging all politicians to do "whatever it takes" to maintain a trade deal with Europe.

Production for the home market fell by 16%. Export sales were down by 7%. Approximately 80% of output is exported, part of the highly integrated trade with Europe. No deal will lead to a radical realignment of supply chains. No longer will parts pass several times across the Channel. Consolidation within Europe will be the guideline. There will be a significant loss of capacity in car assembly in the UK with implications for the wider domestic supply chain.

With just eight weeks to go to the March deadline, the IOD warned this week that one in three members are considering geographical diversification into Europe. Business is preparing for no deal. This week the PMI Markit Manufacturing Survey reported record stock piling as Brexit preparations continue.

The manufacturing sector made a lack lustre start to 2019, as trends in output and new orders slowed and employment fell for only the second time in the past two-and-a-half years. Companies reported Brexit preparations led to sharp rises in both purchasing activity and stockpiling of inputs at warehouses. A rise before the fall. We expect manufacturing output to grow by just 0.9% this year.
Alternative Arrangements ...
Good news for Theresa May this week. The Prime Minister was successful in persuading the Tory party and the DUP to vote once again against the Brexit deal recently presented to Parliament.

According to Matt Chorley in the Times Red Box ...
"It was a victory for the Prime Minister after persuading the Tory party to vote against the deal she had spent most of the Winter trying to sell to them."

A victory indeed. The pitch was simple. The PM's deal, the only deal on the table, the only doable deal, agreed by everyone in Europe and most in the party, expect the ERG. Well don't vote for that deal, vote for something else. Don't vote for no deal. Don't vote for a delayed deal. Vote for a new deal. But what? It was left to Sir Graham Brady to save the day.

An amendment demanding the Irish backstop be replaced was presented. The "Brady Word Bunch" provided consensus. "Parliament has made it clear the basis of an agreement" explained the Prime Minister. The Irish backstop is unacceptable. Alternative arrangements must be made. We don't want a backstop, we want alternative arrangements. We want something else, the House has decided. Something else ... but what, we are not exactly sure.

As a Tory Prime Minister had earlier explained, "On the point which divided us, we have not made up our own minds. We could not pretend to give a decided lead to anyone." The Prime Minister was Arthur Balfour. The year was 1903. The issue was trade policy with Europe. The Tory party was once again divided. The Prime Minister was manoeuvring desperately to keep the party together. Over one hundred years later, here we are again, sometimes we wonder why ...
God wanted Trump to be President ...
No self doubt in the White House this week. Press secretary Sarah Hallelujah Sanders claimed on Wednesday Trump's presidency is part of a higher calling.

"I think God calls all of us to fill different roles at different times. I think he wanted Donald Trump to become President." Sanders claimed during an interview with the Christian Broadcast Network. "That's why he is there. I think he has done a great job in supporting a lot of things that people of faith really care about."

Trump is widely expected to make a big anti abortion play in the State of the Union Address next week. The President's ratings are plummeting. "God on our side" "War with Russia" and an appeal to the "Pro Life" group part of the new electoral pitch apparently. This week the administration announced withdrawal from the Nuclear Treaty with Russia according to Mike Pompeo and support from a higher authority according to Sarah Sanders. Press briefings in the White House abandoned for the time being. Why talk to the press when you are in communication with a supreme being in the Oval Office.

This week Trump was irritated by US security heads. Director of National Intelligence Dan Coats and CIA Director Gina Haspel both indicated on Tuesday there is significant distance between the president and the intelligence community on major issues. They testified the Islamic State remains a forceful presence in Iraq and Syria, North Korea is unlikely to give up its nuclear weapons. Iran is not seeking a nuclear weapon.

Taking the advice on board, the President attacked once again the U.S. intelligence community. "The intelligence people seem to be extremely passive and naive when it comes to the dangers of Iran" Trump explained on Twitter. "They are wrong and should go back to school". Oh the things they teach in High School these days. If only they were more grown up!

No back to school fro the Fed Chair Jerome Powell this week. School is out as the Fed held rates and signaled patience with potential rate hikes later this year. Markets rallied, the Dow jumped over 400 points. Trump was pleased.

The Fed is worried about growth in China and the rest of the world. No such fears for the US economy. The US added 304,000 jobs in January versus the 165,000 expected. The Fed may be back in the playground, seeking re enrolment before the end of the year.

That's all for this week, have a great week-end. We will be back with more news and updates next week!
John
© 2019 John Ashcroft, Economics, Strategy and Social Media, experience worth sharing.
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