Subject: Consumers Coppering Up? ... of Retail Sales, Jobs and Inflation

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                                                                                                         Saturday 19th August 2017
Hi Friend,
Consumers Coppering Up ... Of Retail Sales, Jobs and Inflation ...
Retail spending increased by over 4% in July according to the latest data from the ONS this week. Sales volumes increased by just 1.3%. Consumers are spending but getting less for the money as inflation hits the high street. Great news for retail, higher prices and higher margins, with less work at the till, a blissful trilogy for retail success.

In the second quarter as a whole, retail sales volumes increased by 2.6%, spending increased by almost 6%. In the same period last year, volumes increased by over 4% but spending increased by less than 2%. Households are spending despite the apparent squeeze in real incomes. If the trend is maintained, fears of a consumer slowdown this year will evaporate.

Inflation is hitting the high street. The headline index CPI was up by 2.6% in July unchanged from the prior month. Goods inflation at 2.7% moved ahead of service sector inflation (2.6%) for the first time in almost five years. Producer prices increased by 3.2%. Input costs slowed to 6.5% from a peak of 20% in January. The impact of oil prices and sterling depreciation is working out of cost pressures. We expect inflation to moderate towards the end of the year. Inflation CPI should close around 2.5% assuming no real acceleration in earnings.

Job numbers this week, suggested strong growth continues in the UK. Unemployment fell to 1,484 million. The unemployment rate fell to 4.4%. The U:V rate fell to 1.9. Vacancies in the economy numbered 768,000.
Earnings increased by 2.8% in the month of June. Private sector earnings increased by 3.1%. Finance and business sector earnings increased by 4.1%.

The long awaited acceleration in earnings, may be appearing. We expect earnings to increase by over 3% by the end of the year, maintaining price pressures, offsetting the slowdown in imported inflation. Strong growth, a tightening jobs market, inflation above target, interest rates at 25 basis points. Sometimes, like Alice, I think of six impossible things before breakfast ... monetary policy and the government approach to Brexit always feature ... 
Sterling weakness boosts tourism  ... true
Weaker sterling attracts record number of foreign tourists to the UK, is the headline in the Guardian today. ONS figures reveal there were 3.5 million visits in the month of June an increase of 7% on a year ago.

Tourism is one area of trade which demonstrates price elasticity and a response to the vagaries of sterling. UK visits overseas are expected to increase by 4% this year, compared to 7% growth last year. We model tourism as a function of relative wealth and price. Much traveling to be done if the trade deficit is to be eliminated.

We expect the volume of foreign visits to the UK to increase to over 40 million this year. Visits abroad for UK residents will increase to over 70 million. The deficit on tourism will be over £20 billion once again this year as in 2016. It hasn't been so high, since 2008 ... More information and charts on this and more, are available in The Saturday Economist Library.
West Wing WTF ... Steve Bannon is leaving ...
Traders cheered, the Alt-Left jeered. Steve Bannon is leaving the White House. It has been a turbulent week for President Trump. Stephen K. Bannon is returning to Breitbart as executive Chairman. Bannon will maintain the fight for the Alt-Right and for the right wing soul of the Trump administration.

"He has not been with us very long" explained the President in response to a press query this week. Usually a signal for imminent departure and it was, Trump explained Bannon was a good friend and is not a racist. Good to know. There appeared to be some doubt about White House credentials following the President's statement on Charlottesville. "Fine men on both sides" said Trump, an apparent endorsement of Nazis, KKK and white supremacists everywhere.

Condemnation flowed from allies and enemies alike. Trump united Iran and Israel in condemnation of his remarks. World leaders were openly critical. The Pope was moved to make a statement. The President lost his advisory panels on manufacturing and strategy. Who will stand with me? Not many. Republicans begin to distance themselves from the White House. The Democrats already have the best spots to rubberneck the rumpus in the Oval Office.

The good news ... fears of a nuclear war with North Korea have evaporated. Kim Jung Un decided against bombing Guam. It would have been good for tourism explained Trump! President Moon Jae-In of South Korea assured there would be no war with the North. The military affirmed. Steve Bannon explained, there was no war game scenario which didn't leave three million dead in the first months of conflict on the Korean peninsula. A sobering thought Bannon as a dove! Who would have thought that.

That's all from the West Wing Whisky Tango Foxtrot this week. It has been a chaotic week, make that four weeks. The President has attacked the Attorney General, the leader of the Republican Party and the GOP as a whole. Who would have thought governing a country could be so difficult ...
Don't Miss the Economics Conference on the 13th October. Our theme is the Economics of Greater Manchester. We will be talking about the Inclusive Growth Challenge, Balancing the Books and the Sectors Driving Growth in the City Region! Another Great Conference in the pro-manchester series . We have a great line up of speakers to be announced soon. Book Now Don't Miss Out ...
John
Markets are mixed on news from the White House. The president's plans for tax cuts and infrastructure spending are under threat. That's all for this week. Have a great week-end ... We are getting some great feedback on the Net Promoter Scores survey. Here's what you are saying about the weekly update! Thanks.
© 2017 John Ashcroft, Economics, Strategy and Social Media, experience worth sharing.
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