Slow economic growth with inflation – stagflation – could result from the surging price of oil. Markets are mesmerised by the thought that as we go into winter in the Northern hemisphere oil is heading towards $100-a-barrel. The chart above shows Brent crude is in the mid-nineties as the Saudis are determined to push prices higher. The US is now insulated by domestic fracked shale oil supplies and the dollar has become a petro-currency as a result. Campaigners today again won permission for yet another hearing to challenge and delay the go-ahead to build the Sizewell C Nuclear Power Station. Thanks to anti-frackers, anti-nuclear campaigners, and Net Zero zombies, Britain’s energy insecurity has increased.
Oil prices will add to the political miseries facing Sunak as he decides whether to go for a May election before things get worse, or play it long in the hope that things get better. He’s caught between an unfracked rock and a hard place…
We introduced EuroGuido as a channel focused on European affairs ahead of the referendum in 2015. We had a lot of fun over the years and ran a mainstream media-mocking series of articles with the #DespiteBrexit hashtag, highlighting the media’s– particularly the BBC’s – qualifier for any positive news that happened. At some point, political discussion has to move on from Brexit.
The political salience of EU issues among readers is diminishing and the wider world is looming larger. The Indo-Pacific tilt away from the Old World is well underway. China and India are the coming superpowers with super-sized economies whilst the European Union’s share of world trade is shrinking, and even native national populations are shrinking in absolute terms. Focusing on the Atlantic powers seems narrow. Apart from the conflict in Ukraine, there are tensions over Taiwan and ongoing wars in the Middle East, as well as instability in Africa and economic challenges in South America. There is a lot more going on in the world outside Europe.
So we’ve renamed the Twitter/X account and have updated the branding to reflect our shifting coverage. GlobalGuido will cover trade, politics and economic affairs. So expect to read about election results in Argentina, and everything from crypto-regulation to defence alliances. We’ll do it in the accessible way we have always done; serious issues lightened, perhaps, by looks at the US election – which gets saturation coverage by the UK media from a monocultural perspective. We won’t cover everything because this isn’t the Economist or Foreign Affairs. Often we will report on international policy developments with reference to UK policy. We might, for example, reference the US Federal Reserve’s interest rate moves because they set the monetary agenda for us far more than many think the Bank of England does. We will, as always, aim to do it all in an entertaining way with an underlying bias towards policies which promote freedom and prosperity.
The International Monetary Fund has admitted it has, once again, underestimated the country’s economic growth, and now forecasts the UK will avoid recession this year. They claimed the UK economy would contract by 0.3%, the bottom of the G7 alongside Germany. Now that’s been upgraded to 0.4% growth over the year.
Falling energy costs and improved business confidence have contributed to their revised data, although they hasten to add add that “the outlook for growth, while improving somewhat in recent months, remains subdued“. Not so subdued that the UK is now expected to outperform Germany, which is still forecast to contract by 0.1%…
Chancellor Jeremy Hunt said the revised figures were a “big upgrade”:
“It praises our childcare reforms, the Windsor framework and business investment incentives. If we stick to the plan, the IMF confirm our long-term growth prospects are stronger than in Germany.”
Since 2016 the IMF has consistently underestimated UK GDP growth… every single year.
While today’s figures are an improvement, Guido hopes they’re still far too pessimistic…
The new Manufacturing Outlook report from Make UK and BDO for the first three months of 2023 shows plenty of welcome optimism in the manufacturing sector, with a sharp uptick in confidence, investment and output compared to the last quarter. BDO’s Head of Manufacturing, Richard Austin, even dares to talk of the “the green shoots of growth beginning to take shape“. Albeit with enough caution to save face…
The data shows improved performance across the board for the sector:
“Both Employment and Investment Intentions increased on balance compared to last quarter. The improvement in the latter metric is particularly interesting as manufacturer’s confidence in investment plans had recently hit negative balances just one quarter ago […] Investment Intentions increased from -5% to +14% as growing order books, supply-chain disruption easing, and cooling inflation has allowed businesses room to focus on the future and less so on short-term issues.
Both business confidence and UK economy confidence improved this quarter. This was due to improvements in most UK nations and regions who are feeling slightly more positive about the next twelve months, except for the West Midlands which reported a marginal decline (despite remaining overall more positive than negative about the future).”
Manufacturing output balance increased to +21% over the last three months, with it forecast to rise to +32% over the next quarter. Similarly, the total orders balance has shot up to +28%, up from +6% in Q4 2022. Confidence is returning, orders are rising, and investment remains strong. Finally, some good news…
Read the full report below:
‘You will be worse off than you were last year’ is the message. GDP per capita is forecast to fall 0.8% and GDP 0.2%, Consumer Price Inflation is estimated to be 6.1% this year, and unemployment will rise slightly to 4.1% (3.7%). As has been the case since 2010, the Treasury is forecasting falling debt and deficit in the future that never comes. The OBR reckons we’ll have a short, shallow downturn. Sterling is down and gilts are up – though the markets are more concerned about a potential collapse of Credit Suisse and a banking crisis contagion. Look on the bright side, beer duty on your pub pint is down…
UPDATE: Emerging from the small print:
- OBR says 2.1 million taxpayers have been dragged into paying the higher rate of income tax and 350,000 dragged into paying the additional-rate because of threshold freezes.
- Sunak and now Hunt’s ongoing stealth tax raid via threshold drag will raise £29.3 billion by 2027/8. Equivalent to raising income tax basic rate by 4p.
The OBR was wrong in its most recent deficit forecast – out by a mere £30 billion (so far) for the “deficit black hole”. This chart is based on their November 2022 Economic and Fiscal Outlook (EFO). This morning in a sheepish release they admit the deficit is a mere “£22.0 billion below our forecast profile in the headline figures and £30.6 billion below profile on a like-for-like basis”. If you are making forecast errors of that magnitude on a three-month time horizon you are simply not credible.
Good news on the size of the deficit black hole came as:
- Composite PMI was published this morning and hit 53.0 (above 50 indicates the economy is growing) against the consensus forecast of 49 (contraction). Beating the Euro Area (52.3), France (51.6) and Germany (51.1)…
- On top of that the Public Sector Net Borrowing figures for January 2023 were out this morning and they show the books in a surplus of £5.4 billion against market expectations of a deficit of £6.95 billion.
- Last Friday UK Retail Sales for January 2023 came in at up 0.5% month-on-month against expectations of down 0.3%.
- On Wednesday inflation came in at 10.1%, a smidgen lower than the market consensus forecast of 10.3%.
- On Tuesday Average Earnings came in at 6.7% against a consensus of 6.5%.
- Also on Tuesday the number of people in work rose by 74,000 against the market forecast of 40,000.
- The UK Natural Gas trading price fell to the lowest since August 2021 – less than it was before the invasion of Ukraine.
- The 2022 Full Year GDP growth rate was the highest in the G7 for the second year running.
- To top all this good news off the FTSE 100 hitting 8,000 puts it at an all-time high.
This all seems to run counter to the narrative of the BBC and the Labour Party that the economy is in a never-ending downward spiral and is a basket case compared to Britain’s peers. Get a grip people!
