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Saturday 22nd July 2017
Hi Friend,
Retail Sales Surge in June ... Borrowing Disappoints ...?
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Retail sales surged in June according to the latest ONS data. The volume of retail sales increased to 2.9% in the month. Sales value growth increased by almost 6%. In the first three months of the year, sales values increased by 5.7%, so much for the real income squeeze. The gloves are off and the wallets are open. Spending on clothing, textiles and footwear increased by over 6%.
On line sales are booming. Internet sales increased by 15.9%, accounting for over 16% of all retail sales in the month. The data follows information on week pay growth, suggesting real incomes are under pressure. For the moment, the squeeze is having little effect on retail sales. The performance of Sterling is boosting tourist traffic and perhaps the high street spend.
Inflation figures were a surprise for some this week. The headline rate CPI fell to 2.6% in June following an increase of 2.9% in May. Oil and the weakness of Sterling explain the surge in prices. Soft oil and a Sterling recovery explain the inflation mitigation. Goods inflation was up by 2.6%. Producer prices eased back to 3.3% Input costs fell below 10%. Inflation may have peaked in the first half of the year. The underlying service sector inflation at 2.7% in June, is a clear indication inflation will remain above target.
The ECB made the call this week, to end QE and to call an end to the era of low rates in Europe. The MPC will herald the headline inflation drop as a reason to avoid a rise in base rates. Strong retail sales and underlying inflation rates suggest it is time to make the move. Unless pay rates rise, the MPC will be loathe to act ...
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Borrowing disappoints ...
Government borrowing increased by almost £2 billion in the first three months of the year according to the official figures released this week. Borrowing in the month was £6.9 billion up from £4.8 billion prior year and was £22 billion in the year to date.
Public sector net debt (excluding public sector banks) was £1,753.5 billion at the end of June 2017, equivalent to 87.4% of gross domestic product, an increase of £128.5 billion
on June 2016.
Total revenues increased by 4.7% in the first three months of the year. VAT revenues up by just 2%. The VAT performance is disappointing given the growth in retail sales values. Government spending was up by 4.7%. The age of austerity may well be over. The evident problem for the Chancellor is in the surging level of debt and the cost of debt service.
Interest costs were up by £3.4 billion in the quarter, up to £16.7 billion from £13.3 billion prior year. The Bank of England rebate held back the full impact from net spending. So what prospects for the rest of the year? The OBR is forecasting an increase in the overall level of borrowing to £52 billion in this financial year up from £46.2 billion in the year to March 2017. The Chancellor has little room for largesse in the Autumn budget ...
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Sean Spicer Resigns ...
The President has appointed Anthony Scaramucci Director of Communications at the White House. It was all too much for Sean Spicer former White House Press secretary. Sean Spicer resigned.
Sarah Huckabee Sanders, Spicer's deputy was appointed to replace him in what may well become the quarterly White House shuffle. "The President had wanted me to stay" said Spicer "Better to give them an opportunity to have a clean slate".
Spicer had the difficult job of defending the President in the operation of the unorthodox. According to the Washington Post, "The humiliations started with his first appearance in the Press Room, the day after Trump's inauguration. Press comparisons with the size of crowd compared to Obama, prompted a fierce response at the behest of the President. "This was the largest audience to witness an inauguration, period", said Spicer. It was later revealed that Trump angered by cable new coverage, had personally ordered the performance.
More problems followed as Spicer was forced to explain the "travel ban" was not a "travel ban". Kelly Anne Conway explained the use of Spicer's "alternative facts". Saturday Night Live led to the merciless lampooning of Spicer, in the "Spicey Show" on Saturday Night Live.
Spicer was increasingly undercut by Trump on Twitter or in any media vehicle for that matter. Sidelined in recent weeks, the daily briefings discontinued, the off the record sessions replaced the incoherent attempts to keep pace with the ramblings from the Oval Office. Spicer's credibility was exhausted. It is time for Scaramucci to have a go. Scaramucci loves the President, loves the White House, loves Sean Spicer, loves America as he explained in his first press show on Friday.
OK, he may have dismissed Trump as a "Hick Politician" in the past ... but that was then and this is now. For the moment, it's a love in at the White House ... but for how long remains to be seen ... at least he has no contacts with the Russians ... or ...
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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John
That's
all for this week. Have a great week-end ... 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 ... Book Now Don't Miss Out ...
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