The Pound is going down the Toilet

[Rum]

I'm sure Reuters have an 'agenda' too., but most of us like to think they try to report facts mostly. Reuters on 25th Aug at:http://uk.reuters.com/article/uk-astonm ... KKCN1B51KJ

LONDON (Reuters) - Britain’s economy is beginning to feel the Brexit pinch, or perhaps given the strong performance of the rest of the world economy, it should be punch.

After a prolonged period of relatively benign economic numbers following last year’s vote to leave the European Union, there are now signs of a potentially serious slow down.

They stretch from retrenching households to hesitant businesses, from a widening trade deficit to lacklustre manufacturing. They also come just as the EU and Britain return to the negotiating table, the latter with a handful of new post-Brexit position papers.

Since mid-August, London has been releasing official papers on issues such as trade, customs, the European Court of Justice, and what the province of Northern Ireland’s future border with EU member Ireland will look like.

The performance of Britain’s pound over that period suggests few people were impressed enough with them -- or with the likelihood they will come to pass -- to overcome the economic signs.

Running through the release of five official Brexit papers, the pound has lost more than 1.4 percent against the dollar since Aug 14 and the euro has gained the same against sterling.

While the pound weakness is not directly linked to the papers, their release has clearly done nothing to improve confidence in the currency.

That is at least in part because the UK economy is starting to feel the impact of Brexit.

“Economic momentum looks uncertain. Monthly factory orders this year suggest that the sector is failing to capitalise from a weaker sterling and a pick-up in global trade,” Jaisal Pastakia, investment manager at Heartwood Investment Management, said in note.


Elsewhere, second quarter economic growth figures showed consumer spending slumping to a two and a half year low of just 0.1 percent quarter-on-quarter.

Business investment was also at a standstill. Barclays said this was “highlighting just how much businesses are holding back investment in the face of high levels of uncertainty regarding the outlook for business conditions.”

Add to that a warning from Britain’s heavyweight food supply industry that EU workers it relies on are already leaving or considering doing so.

It is not completely linear, of course. Car manufacturing bounced back in July and the unemployment rate is falling.

Last month’s purchasing managers indexes also pointed to steady -- albeit sluggish -- economic growth over the coming months.

So the wheels have not come off.

But the backdrop for Britain as it returns to the table on Monday is nonetheless a stark contrast to what the other side is experiencing.

The euro zone, which comprises 19 of what will be the remaining 27 EU members, is flying high.

The latest data shows annual growth at 2.2 percent, the highest for more than six years; economic sentiment is cruising at levels last seen before the financial crisis; even the bloc’s notoriously high unemployment rate is falling.

Improvement is fairly widespread among euro zone countries, meanwhile.

Florian Hense, an economist with Berenberg bank, notes the euro zone has now had 17 consecutive quarters of growth.

“And most countries of the currency union were at the party,” he said in a note. “Countries that have for a very long time... struggled do get a stable footing, are beginning to recover, too.”

Whether this continues or is peaking may become clearer in the coming week when various sentiment indicators, unemployment and manufacturing reports are released.

The flash composite purchasing manager index has already shown the bloc to be well in expansion mode with no sign of an August slowdown.

Inflation too will be on the agenda. It is expected to be 1.4 percent year-on-year, too far below the European Central Bank's near 2 percent target to impact rates decisions on its own.

But the growth picture is enough to have the ECB at least thinking about tapering its quantitative easing bond-buying programme.

Some have taken to calling that QExit.

Reporting by Jeremy Gaunt; Editing by Toby Chopra
Our Standards:The Thomson Reuters Trust Principles.

[Hermit]

The pound isn't going down - it just buys less.

Less imported stuff. Locally manufactured gods will become more attractive, which is good for local employment. I'm not sure if that is of net benefit, though. Inflation may eat up whatever benefit there is for the plebs.

This is true. Your labour will be cheaper vs international markets making doing business in the UK more attractive, and your exports will be cheaper giving an edge to your manufacturing sector.

Our exports have always been cheaper, especially wool, iron ore and woodchips, and we have lost the last trace of a manufacturing sector when Ford, Toyota and Holden closed their remaining assembly plants in Australia. I wish we could export our Prime Minister, though, but not even Trump wants to have anything to do with John Turnbull. Reckons he gave Obama a bum deal.

[mistermack]

Another factor affecting the UK economy is the over-inflated housing market, which is a bubble that has been hanging over the country for years, and has been kept inflated deliberately by the policy of mass immigration and very little new building.

That could not go on for ever. It was always a threat, and was always going to burst one day. Successive governments have been doing absolutely everything they can to keep it going, by various schemes to entice first-time buyers and rock bottom interest rates. But now, in spite of a still huge quarter of a million net new residents in the year to March, houses are struggling to not drop in value.
The UK economy is slow because UK buyers are putting off spending, sentiment is weak, and that affects the housing market probably more than the consumer market.

I don't see what more the UK government can do to keep the housing market propped up, and if prices start to dive, you WILL get a recession. But that's always been in the pipeline, whatever the Brexit result would have been.
It's just a question of when, not if.
If you keep blowing up a bubble, you know what happens.

Maybe a correction is long overdue, and the UK economy needs shaking up, and steering away from home service industry and domestic consumption towards commodity production and exports.

[Scot Dutchy]

As long as a house is seen as an investment and the house market a ladder the bubble will continue.

[pErvinalia]

Housing has sadly become the only way most people can accumulate any wealth now.

[Scot Dutchy]

But it depends on the market. Most presume houses will always rise in price but why should it. If demand was satisfied it would not rise. So the shortage is creating an artificial market lovingly exploited by right wing parties which creates greed which in turn is a fundamental requirement for right wing parties to get voters. Before Thatcher the majority rented.
The same was true was true here during the 'Rebuilding of the Netherlands' in the 50's nobody would have thought of buying except the middle classes who were in business. The VVD (conservatives) introduced buying to the masses through subsidised selling. Greed was born and Social Democracy took a bad knock which I am afraid it has never fully recovered from.

[mistermack]

As long as a house is seen as an investment and the house market a ladder the bubble will continue.

You're right, Oh wise one.

Bubbles never burst.

[Brian Peacock]

Mergification has occurred.

[Rum]

I have no doubt at all that Article 50 will be triggered. The government will fall if not. What the deal will be afterwards is another matter.

[rainbow]

https://www.poundsterlinglive.com/best- ... ro-history

[Forty Two]

But it depends on the market. Most presume houses will always rise in price but why should it. If demand was satisfied it would not rise. So the shortage is creating an artificial market lovingly exploited by right wing parties which creates greed which in turn is a fundamental requirement for right wing parties to get voters. Before Thatcher the majority rented.
The same was true was true here during the 'Rebuilding of the Netherlands' in the 50's nobody would have thought of buying except the middle classes who were in business. The VVD (conservatives) introduced buying to the masses through subsidised selling. Greed was born and Social Democracy took a bad knock which I am afraid it has never fully recovered from.

I agree that home sales should not be subsidized. That's why things like, in the US, federally subsidized mortgages, like "FHA loans" and the like should be gotten rid of. The subprime mortgage crisis was a creature of government policy trying to get people who could not afford houses to become homeowners. Clinton and Bush both boasted about the rising level of homeownership in the US.

Now, there is nothing wrong with owning homes. It's actually a great thing for people to strive for, and their goal should be mortgage-free home ownership, and loan free auto ownership. Buy less expensive stuff, and pay it off. That's why you see so many accountants and financial guys who say they never buy new cars, and live in smaller homes.

The governments' propping up mortgages causes more demand in the housing market, so the price is pushed up. Easy credit makes people able to buy more home and more car than they probably should.

Home ownership is a nice part of an increased standard of living. But, when they cut down the lending requirements so that people were buying houses with $0 down payment and financing the closing costs, it had people just signing on the dotted line and buying houses at the very top of their borrowing level, pushing their financial limit.

[Forty Two]

I have no doubt at all that Article 50 will be triggered. The government will fall if not. What the deal will be afterwards is another matter.

The UK will be fine. I'm not exactly sure why it is so important to Remainers that the UK be a State in the EU. From outside the EU, the UK will still trade and still do business with the rest of the world. There will be some areas where trade is less favorable, but there will be other areas where trade will be more favorable because the UK will be able to cut deals on its own. There is enough global competition that someone will want to take advantage of some deals with the UK.

And, it's not like the EU is some glorious wonderland. It's a rather un-Democratic, bureaucratic behemoth that is basically run by Germany. Most of the EU's legislative work is done behind closed doors, in committee, away from prying eyes of constituents and citizens. It's rather dictatorial, like when the Dutch and the Irish were unkind enough not to consent blindly to the proposed EU constitution, the EU decided that they were bound by the contract they just rejected, anyways.

The EU mishandled the Greek debt crisis, and over time has left the southern European countries near bankruptcy. And, overall the Euro has hurt Europe as a whole, economically.

Brexit probably will hurt the UK in the short term, but it may well be a benefit in a few years.

[Scot Dutchy]

You dont have clue over the EU do you? Not a single thing.

[Rum]

He's our 'everything expert'. Didn't you know?

[Forty Two]

You dont have clue over the EU do you? Not a single thing.

Did I say something that was incorrect? What? The EU handled the Greek debt crisis well? The southern European countries are not going tits up? Portugal, Italy, Spain? Greece? Germany is not the de facto boss of Europe? On that last point, Romano Prodi, former EU President, agrees with me. Does he also have no clue? As Prodi said, "The resolutions of the Greek crisis was not a Brussels-Athens decision, it was a Berlin-Athens decision." UK's Former Deputy Prime Minister Lord Heseltine recognized Germany's dominance in the EU also. Heseltine was strongly Remain in the Brexit controversy, and he agrees that Germany is the dominant continental force in the EU.