|
Saturday 9th September 2017
Hi Friend,
Manufacturing Rally ... Are Car Makers Driving Growth?
|
|  |
Manufacturing output increased in July according to the latest data from the ONS. The year on year increase was 1.9%, a strong rally from the dismal performance in the second quarter. Transport output increased by almost 8% in the month. The SMMT reported an 8% increase in car manufacturing in July, by way of explanation.
In August, it just got bettter! According to the Markit/CIPS manufacturing survey, growth in the sector gathered pace as new order inflows increased. Domestic demand was the prime source of new contract wins. Growth in Europe and the rest of the world, is also stimulating demand.
Should we get too excited? Not really. We expected a strong performance in the third quarter, softening towards the end of the year. Car output is down by almost 2% year to date. We expect U.K. registrations to fall by 2.5% this year. The domestic market was a contributing source of the surge in July, up by 18% year on year. For the year as a whole we expect manufacturing output to increase by 1.5%, up from less than 1% last year. Better than last year but no real "march of the makers" re balancing the economy.
So what of Construction?
Construction output was flat in July. Strong growth in housing, including public sector housing, was offset by weakness in infrastructure and other public sector projects. Private sector investment in commercial property continues to offset significant weakness in industrial projects. It has been a similar story throughout the year. For the year as a whole we expect construction growth of around 1.4%, down from 2.4% last year. Unless and until the government commits to real infrastucture expansion, construction will remain subdued into 2018.
|
|  |
House Prices ... rise and fall on Planet ZIRP ...
The rate of house price increases fell in August, according to Nationwide. The rate of increase fell in the month to 2.1% from 2.9% prior month. Should we worry about a house price collapse? Not really! According to the Halifax House price index, house prices increased by 2.6% in August, up from 2.1% in July.
New mortgage applications suggest underlying demand strength in the market. "House prices should continue to be supported by low mortgage rates and a continuing shortage of properties for sale", according to Russell Gailey, Managing Director of the Halifax Community Bank.
We expect the overall rate of house price inflation to average 2.4% in the final quarter, down from 6.4% last year. The issue driving the slow down is affordability. The price to earnings ratio is critical over the medium term. Earnings growth of 2.4% is incompatible with a 6.4% growth in house prices on a continuing basis. The Nationwide house price to earnings ratio is over six. The long term average [1987 -2017] is around 4.3. On Planet ZIRP, post 2008, the average has been around 5.5. Yes QE and low rates boost asset prices!
For those hoping for the kids to leave home, leaving Planet ZIRP, will aid the exodus. Higher base rates may lead to higher mortgage costs. The irony is affordability will improve as higher asset prices, including housing are brought back within the confines of market reality!
|
| West Wing WTF ... Happy Days ...
Obama left a letter for Trump. It is not clear the President has read it. What is clear, is that something is happening in the White House. Happy days! General Kelly is creating order out of chaos. The chief of staff, now has his own protector. Kirstjen Nielsen — his brusque, no-nonsense longtime aide has been appointed as an assistant to the president and his principal deputy.
According to the New York Times, some of her new colleagues are already comparing Nielsen to Cardinal Joseph Ratzinger, the feared Vatican enforcer who eventually became Pope Benedict XVI.
Better still, the President appears to be developing statecraft. The move to sideline the GOP and align with the Democrats on the debt ceiling is claimed by some as a master stroke. Why bother with a debt cap, when the cap is doffed, every time the limit is approached. Playing chicken with a fed shut down, rolling pork barrel politics into the spending plans may preoccupy the Washington swamp. The President seeks to end the game. Why not side with the Democrats to get something done? Political conviction was never a strong point.
As for North Korea a solution may well emerge within the President's gift. Special counsel Robert Mueller is investigating plans to build a Trump Hotel in Moscow as boost to campaign credibility in the run up to the election. It could have been a great boost to peace in our time.
In North Korea, Pyongyang, sits the unfinished Ryugyong hotel. 105 floors of a pyramid style luxury hotel, commissioned in 1987. The "Hotel of Doom" could be the perfect Trump Tower make over. No fire and fury, no nuclear attack. Just electricity and substantial access to capital, the offer to transform the skyline and diplomatic relations North and South. Who said diplomacy was difficult! A president who gets things done, for a profit of course!
That's all from the West Wing Whisky Tango Foxtrot this week. It has been a chaotic week, make that seven weeks. The President continues to attack the Attorney General, the leader of the Republican Party, the leader of the house and the GOP as a whole. Tensions between John Kelly and Trump are rising, Gary Cohn and others have been openly critical ... bubbling nicely ... something has to give and soon ... The President may become a democrat and open a hotel in North Korea ...
|
| | | | | 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 announced this week. Book Now Don't Miss Out ... |
|
John
That's all for this week. Have a great week-end ...
John
Thanks for your feedback on the Saturday Economist. Here's what you are saying about the weekly update! Don't forget to join the club, with access to the library, FAQs, Detailed Bulletins and Special Deals ...
|
| | | | © 2017 John Ashcroft, Economics, Strategy and Social Media, experience worth sharing.
______________________________________________________________________________________________________________
The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The receipt of this email should not be construed as the giving of advice relating to finance or investment.
______________________________________________________________________________________________________________
If you do not wish to receive any further Saturday Economist updates, please unsubscribe using the buttons below or drop me an email at jkaonline@me.com. If you enjoy the content, why not forward to a friend, they can sign up here ...
_______________________________________________________________________________________
For details of our Privacy Policy and our Terms and Conditions check out our main web site. John Ashcroft and Company.com
_______________________________________________________________________________________________________________
Copyright © 2017 The Saturday Economist, All rights reserved. You are receiving this email as a member of the Saturday Economist Mailing List or the Dimensions of Strategy List. You may have joined the list from Linkedin, Facebook Google+ or one of the related web sites. Our mailing address is: The Saturday Economist, Tower 12, Spinningfields, Manchester, M3 3BZ, United Kingdom.
|
| |
|
|
