Sometimes everything comes together in unintended ways. That has happened to me this week. I…
Regular readers will know that I have been following the path of the British economy post-Referendum in 2016 to see whether the doomsday that the Remainers predicted was likely. It became colloquially known as ‘Project Fear’ as mainstream economists, so-called progressive economists who had their snout in the Labour Party as advisors (and we know where that took the Party), institutions like the Treasury and the Bank of England, all pumped out a sequence of terrible predictions about what would happen to the British economy should the Leave vote succeed. The predictions started in the lead up to the June vote. Immediate recession was forecast. That didn’t happen. Then new forecasts came out – with longer term disasters predicted. As each prediction horizon passed without disaster, the predictions morphed, new horizons were introduced, more nuanced analysis was presented. And, as nothing much has happened to ratify their fears (and lies), the Project has abated somewhat. The latest data shows that the Project is as moribund as it ever was.
Private sector confidence in Britain rising
Since the Referendum, the British economy has grown by 5 per cent in real terms (up to the September-quarter 2019). The EU28 has grown by 6.8 per cent but nations such as Italy have grown by 3 per cent.
The US has grown by 8.4 per cent and Australia by 7.5 per cent. Japan has grown by 4.1 per cent.
It is reasonable to conclude that the UK’s slightly slower growth rate when compared to the EU28 could be due to the increasing uncertainty over the three or more years since the Referendum, particularly as the parliamentary process seemed to be stuck going nowhere before Boris Johnson became PM and found a way to get a new election on the issue.
And don’t be fooled by the claims that the December election was about other things than Brexit. That was what people were voting on.
Otherwise, how could they reject a progressive Labour Manifesto, albeit clothed in neoliberal macroeconomic nonsense courtesy of the failed advisors, when the nation had been ravaged by 9 years of Tory austerity?
The vote was the ‘peoples’ vote’ that the Remainers had wanted. The problem was they seriously misunderstood how detached they are from the mainstream concerns of the voters in the Midlands and the North.
We can obviously dismiss what comes next as an expression of ideology – the corporates holding out until they got what they wanted and then resuming business as usual – but the latest data from the – IHS Markit / CIPS Flash UK Composite PMI (released January 24, 2020) – shows that:
1. The “UK Composite Output index” is at a “16-month high”.
2. The “UK Services Business Activity Index” is at a “16-month high”.
3. The UK “Manufacturing Output Index” is at a “16-month high”.
4. The “UK Manufacturing PMI” is at a “16-month high”.
What does that all mean?
The PMI data is derived from surveys of “panels of around 650 manufacturers and 650 service providers”, which are appropriately stratified (by size of company, sector, contributions to GDP) to be representative and scalable.
The Composite Output Index is “calculated by weighting together comparable manufacturing and services indices using official manufacturing and services annual value added.”
The Manufacturing PMI “is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%).”
What the data is showing is that all the major economics aggregates that pertain to output across sectors and employment has turned upwards and rather significantly.
The IHS/CIPS data shows that:
January data … highlighted a decisive change of direction for the private sector economy at the start of 2020. Business activity expanded for the first time in five months, driven by the sharpest increase in new work since September 2018.
The data shows:
1. “rising demand for both manufacturing and services, suggesting business is rebounding …”.
2. “uncertainty ahead of the general election has started to ease, encouraging more spending and helping push business expectations of future growth to its highest since mid-2015.”
3. “Hiring has also picked up”.
4. “The uplift in sentiment about the outlook hints at even better growth to come …”
5. “Prospects around the future improved through an injection of confidence not seen June 2015.”
There was also positive survey data coming out of Britain in January.
Accounting firm PwC released their – 23rd CEO Survey – UK findings – (January 21, 2019) on the eve of the Davos talkfest.
1,581 CEOs were interviewed (83 countries) including 126 CEOs in Britain. The survey was conducted before the December election.
The results show that global uncertainty was problematic for corporate investment in the UK. This uncertainty was not confined to the Brexit delays.
The survey shows that Britain was still seen as an “attractive growth prospect” for investment as it was in 2015, despite the uncertainty.
The number of US-based CEOs who thought the UK was an attractive “growth target” as risen significantly over the last 12 months.
European-based CEOs are also “more positive” about the UKs prospects than they were five years ago.
The UK is seen as “the fourth most important target for companies looking for markets (Source).
The spokesperson for the PwC report was quoted as saying:
The findings provide timely perspective on the UK’s standing as a place to invest and do business. Viewed against the turbulent global backdrop, the UK is a beacon of relative stability …
You can’t replicate natural advantages like our timezone and location between the US, Asia and the rest of Europe, but more than that the UK is a fair and trusted place to do business.
Try marrying that narrative together with the way Project Fear has represented Britain to the rest of the world. Instant divorce!
If you then juxtapose the data from the corporation (some of it is hype) with the latest employment data (actual facts) released by the UK Office of National Statistics (January 21, 2020) – Labour market overview, UK: January 2020 – we see that the:
1. “UK employment rate was estimated at a record high of 76.3%, 0.6 percentage points higher than a year earlier and 0.5 percentage points up on the previous quarter.”
2. “The UK unemployment rate was estimated at 3.8%, 0.2 percentage points lower than a year earlier but largely unchanged on the previous quarter.”
3. “The UK economic inactivity rate was estimated at a record low of 20.6%, 0.4 percentage points lower than the previous year and the previous quarter.”
4. “In real terms (after adjusting for inflation), annual growth in total pay is estimated to be 1.6%, and annual growth in regular pay is estimated to be 1.8%.”
This data doesn’t tell us about job quality.
But the accompanying data release (January 21, 2020) – Employment in the UK: January 2020 – shows that:
1. Employment has grown by 359,000 over the 12 months to November 2019.
2. “Increases in the number of full-time workers have been the main driver of increases in employment in recent years, while the number of part-time workers has been relatively flat in comparison”.
3. “The rate of growth for women working full-time has been consistently higher than for men over the last few years, with women being the main drivers of the strong increase in full-time employment.”
4. “the estimated number of people unemployed for up to six months fell by 146,000 to 804,000, but has been relatively stable for the last two years”.
5. Since June 2016, the proportion of people in employment with zero hour contracts has fallen from 2.9 per cent to 2.7 per cent. The largest falls are in the prime-age cohorts (25-49 years) and women.
I am not implying that the labour market situation in Britain is desirable.
We are just looking at directions of change in this blog post.
And those changes are working against the predictions of Project Fear.
I know that the Project Fear will now concentrate on scary stories about the likelihood or otherwise of getting a ‘trade deal’ with the EU as their next beachhead.
The UK Guardian has been one of the major media proponents of Project Fear and reported on the PMI and labour market results in the article (January 24, 2020) – Pressure eases on Bank to cut interest rates as UK economy improves:
Despite the rise in confidence among firms, economists have warned that business investment and growth could remain muted in 2020 if the prime minister appears to be comfortable with ending the Brexit transition in December without striking a trade deal with the EU.
As I said, the Project is shifting to the EU trade deal talks.
Well think about what Madame Lagarde has recently said.
In 2016 in the lead up to the Referendum, she predicted that Britain would quickly sink into recession if the Leave vote succeeded.
Well fast track to January 23, 2020 and Madame LG is at Davos talking about Brexit in a totally different light.
She told the audience that Europe is now fearing “a cliff edge” at the end of 2020 if they play cute with Britain over the trade negotiations.
Brexit is a little bit less uncertain, but we still have that possible cliff edge in December of 2020.
We don’t know exactly what the trade relationship will be.
And it’s a big partner for the euro area, so that’s certainly a question mark.
It is what I have been saying all along.
Britain runs a trade deficit with the rest of the EU.
The German car manufacturers, for example, already reeling from their criminal behaviour with respect to emissions and their flawed decisions to invest heavily in diesel, will not be too happy if they lose market share in Britain to, say the Koreans and the Japanese.
Moi? I am looking forward to walking through British immigration more quickly in February as the EU citizens queues get the usual ‘foreigners’ treatment.
And the claims by Michael Heseltine that official plans to celebrate the exit this Friday just “rub remainers’ noses in it” (Source) are ludicrous.
After 47 years of compromised sovereignty, why shouldn’t Britain celebrate regaining its independence?
A journey down memory lane – just so you remember!
Here is a collection of blog posts I have written about the Brexit carry-on. There were more but this will suffice.
You cannot say I have been inconsistent – nor inaccurate.
Bank of England backtracks on its doomsday Brexit scenarios (March 18, 2019).
Must be Brexit – UK GDP growth now outstrips major EU economies (January 14, 2019).
The Brexit scapegoat (January 7, 2019).
More Brexit nonsense from the pro-European dreamers (December 27, 2018).
British data confirms strong FDI continues despite Brexit chaos (December 12, 2018).
When 232 thousand becomes 630 – quite, simply horrifying Brexit losses (October 1, 2018).
Brexit doom predictions – the Y2K of today (August 28, 2018).
Brexit propaganda continues from the UK Guardian (July 4, 2018).
How to distort the Brexit debate – exclude significant factors! (June 25, 2018).
The ‘if it is bad it must be Brexit’ deception in Britain (May 31, 2018).
The Europhile Left loses the plot (May 1, 2018).
Britain doesn’t appear to be collapsing as a result of Brexit (December 13, 2017).
British productivity slump – all down to George Osborne’s austerity obsession (October 17, 2017).
Britain’s labour market showing no Brexit anxiety yet (May 30, 2017).
Austerity is the problem for Britain not Brexit (January 9, 2017).
The British reality defying the ideologically-based gloom and doom (November 29, 2016).
Mayday! Mayday! The skies were meant to fall in … what happened? (August 24, 2016).
When journalists allow dangerous economic myths to pervade (June 28, 2016).
Why the Leave victory is a great outcome (June 28, 2016).
Britain should exit the European Union (June 22, 2016).
MMTed Masterclass – London, February 22, 2019
As part of the MMTed initiative, I am holding an MMT Masterclass in London on Saturday, February 22, 2019.
The class will run from 14:00 to 17:00.
The syllabus will be covering basic MMT concepts and the material will be accessible to all. However, it will be an academic-oriented presentation meaning that I want to advance educational goals as a priority.
This is about going back to school!
The Masterclass will be held at:
2 Northdown Street, King’s Cross
London, N1 9BG
This is a small venue in the heart of heart of King’s Cross, London.
There is space for 65 people to attend.
The venue has a licensed bar for refreshments. No catering will be provided by MMTed.
Here is a map to guide you to the venue:
There will be a small charge – £5 – for attendance, which will help cover the costs of the venue hire.
Tickets can be purchased via the eventbrite site in the coming week.
Alternatively, if you wish to secure a spot in advance, you can write to me and I will send you details of how to pay and guarantee a seat.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.