the economy - update

[Lordship 516]

Rook Wrote:

-------------------------------------------------------

> Agreed ???

>

> Interestingly GBP got a jolt higher today as MPC

> member Weale has just made some pretty positive

> comments about future policy (or should I say far

> less negative). This is in direct contradiction to

> comments by MPC member Andy Haldane late last week

> which pushed GBP lower and got very widely

> reported on / jumped on

>

> I noticed that not one media outlet explained that

> Haldane is a known "dove" / negative on economy

> and has been callign for a cut for 2 years. All

> views welcome but balance is very important -

> otherwise the knock on effect is that you the

> start to see and hear lots of views cultivated

> purely on the back on only negativity which I do

> think affects sentiment. I almost think the

> Guardian in particular is purposely misleading and

> guilty of this. I cant look at it. Maybe it sells

> more papers or gets more click throughs.

>

> If it helps, I do believe that we will see a

> shallow recession in the UK to reflect the

> adjustment period/pullback but the fact is that

> markets are nowhere near armageddon.

It's interesting that you pointed to the 'jolt' that the ? received yesterday - so what would you attribute today's drop of 1.3% to ?

Also, what do you think about the prospects of the ? devaluing to sub $1.25 & when ?

I would also like to point out that the 'markets' are not the economy or you might possibly disagree with that.

[????]

malumbu Wrote:

-------------------------------------------------------

> If I remember correctly there are people in the

> financial markets who make dosh out of good and

> bad things.

>

> Someone I know, not exactly a mate, made great

> fortune out of the recession, something to do with

> reinsurance.

>

>

> I should have course put my life savings into

> Euros a few weeks ago.

You should have put your life savings into the FTSE 100 the afternoon of Brexit for a better return :)

[bodsier]

.

[Rook]

Hey Lordship

Todays fall in Cable was mainly due to USD strength, which hit a multi month high against a basket of currencies. This was on the back of data showing US housing starts surged 4.8%. Along with the latest strong US jobs report which was way above consensus, this has reignited investor sentiment of a stronger US economy and yield appeal.

The move higher in Cable yesterday was on back of MPC member comments and Softbank deal - but I think today shows traders will use any excuse to sell higher moves in GBP in face of upcoming UK data, which as mentioned previously is likely to be adverse, and also widely expected to be accompanied by a rate cut. Market sentiment is still very negative for GBP, even in face of inflation numbers at 0.5%, and I expect that to remain the case during this period of adjustment/uncertainty

Given these factors, i do think that GBP will likely go another leg lower (also as mentioned previously) ...most likely when we get those first full "post brexit" data reports in early August

Many media outlets seem to now be reporting on GBP every day eg "GBP rises 1%, GBP drops 1.3% etc". I believe thats a pretty pointless endeavour given the current situation. Id be very surprised if we dont see 1.25 in Cable and that also seems to be consensus where I work/ the street

[Lordship 516]

Thank you Rook,

I agree with you and I am receiving the same feedback, with some suggesting that this will happen towards the end of Q3 and going lower as we enter 2017. The September FSR & the Autumn Statement will show us where things might be heading plus some feedback from the Brexit discussions, although I feel that this will be a slow & moody period of political maneuvering all round making it nigh impossible to evaluate.

[????]

So. Lordship & fellow economists

FTSE 250 now above pre-Brexit levels

Ftse 100 well above Brexit Levels

Stated commitments from big companies to invest in UK post brexit - GSK, BAE, Wells Fargo as examples (been a few)

Hendersons saying property funds set for a boost post-Brexit

Jobless at lowest level since 90s

GDP 2nd quarter above expectations (although lower in June)

Halifax House prices up

India, US, Australia, Canada, China have all on their own initiative approached the UK about new trade deals

All UK banks passed recent stress test (i believe) unlike most Italian and Deutchbank

The biggest downers in data are consumer confidence & PMI but BOTH are survey data based on sentiment, which given the apocalyptic warnings pre-referendum were not likely to be up - but still of concern I'd agree. Uncertainty/sentiment still the issue not reality,

Meanwhile in Europe Austria/France GDP grinds to a halt; Greece situation of the front pages but failing miserably; several banks teetering

It's hardly Armageddon yet is it? I think growth will be dampened for a while but it's not worse case scenario by any stretch on current data is it?

What are your views?

[Earl Aelfheah]

I hope you're right. It's a bit early to tell, but the picture should start to become clearer over the coming months.

[Rook]

Hello all - its me again ! groan......:-)

Sorry its been a while, but Ive been overseas. Thought Id pop back on and give another update. Oh come on you all love arguing about this..

Id be happy to give broad economic update since the vote (data much much better than expected) but i see inflation is all over the news today so lets start there, as the data seems to have awoken a few anti-brexit negative ninnies from their 6 week slumber (dont bite! ;-)

As ever Ill try to concentrate on facts....

the data...

Basically UK headline CPI has surprised to the upside compared with consensus forecasts for September. The upward surprise was broad-based. The most notable upward inflation contribution came from clothing and footwear, which printed at +5.2% m/m and was alone responsible for almost +0.2pp of the increase in the y/y headline CPI rate. According to the ONS, this increase was driven by women?s outerwear in particular.

Elsewhere, there were more modest upward surprises to alcohol and tobacco and other core goods; and despite the recent media focus on supermarket prices, food and non-alcoholic beverage prices DECREASED by 0.1% m/m . Downside surprises came primarily from core services, particularly air fares, communications and recreation and culture.

Generally I would exercise caution at this stage in extrapolating too much on inflationary trends in the UK based on one print, particularly given that the clothing and footwear component can be notoriously erratic over the short term. Additionally, while GBP depreciation may have bolstered clothing prices, there was actually a sustained fall in clothing prices between March and July and price increases in August were modest at best.

Therefore, at the headline level, the emergent picture is one of increasing core goods inflation pressure driven by weakening services inflation. However, it also appears that the September print has been influenced by erratic timing factors (for example in atypical seasonal patterns in hotel room price moves). As ever then, I would recommend paying close attention to the individual component drivers of inflation rather than reading too much into moves in the aggregate measure.

There are some relatively useful articles on the BBC website re inflation ("Inflation not due to Sterling yet" and "Who wins from inflation").

[Lordship 516]

???? Wrote:

-------------------------------------------------------

> So. Lordship & fellow economists

>

> FTSE 250 now above pre-Brexit levels

> Ftse 100 well above Brexit Levels

> Stated commitments from big companies to invest in

> UK post brexit - GSK, BAE, Wells Fargo as examples

> (been a few)

> Hendersons saying property funds set for a boost

> post-Brexit

> Jobless at lowest level since 90s

> GDP 2nd quarter above expectations (although lower

> in June)

> Halifax House prices up

> India, US, Australia, Canada, China have all on

> their own initiative approached the UK about new

> trade deals

> All UK banks passed recent stress test (i believe)

> unlike most Italian and Deutchbank

>

> The biggest downers in data are consumer

> confidence & PMI but BOTH are survey data based on

> sentiment, which given the apocalyptic warnings

> pre-referendum were not likely to be up - but

> still of concern I'd agree. Uncertainty/sentiment

> still the issue not reality,

>

> Meanwhile in Europe Austria/France GDP grinds to a

> halt; Greece situation of the front pages but

> failing miserably; several banks teetering

>

> It's hardly Armageddon yet is it? I think growth

> will be dampened for a while but it's not worse

> case scenario by any stretch on current data is

> it?

>

> What are your views?

The PMI figure is one of the most reliable indicators that has consistently predicted economic performance - fact not opinion. Much of he reporting is qualative but it is reported by experienced professionals and is segregated between large, medium & small companies so it is a serious and dependable index worldwide.

GDP increased by 2.1% year on year mainly from Manufacturing, mining & services; however GDP per capita PPP only increased by 1.5% which shows the effect of the devaluation of the ?. This will become more pronounced over the coming months & years.

The FTSE does not reflect the real economy.

Most of the gains are derived from quantitive easing & increased revenue due to revaluation of the ?.

Much of the other gains are from asset revaluation due to the global nature of the underlying asset [gold, foreign mining assets etc]

The only sensible thing that Trump has said is that the Stock Market is in a bubble, artificially created, mainly by quantitative easing which is giving a false positive in relation to the market's trend. Investors have ignored the underlying fundamental economic indicators which has lead to overheated stock market prices. We now have the ingredients for a severe market correction such as we saw when the market crashed in 2008 as a result of over-hyped subprime loans & credit default swaps & other doubtful derivatives. Have a look at Deutsche Bank which has off balance sheet obligations that are 20 times the German GDP & 5 times their Market capitalization - there are many more banks like this including UK banks [barclay's ?]that Carney absolved from maintaining liquidity requirements recently - prudence has been abandoned and the consumer is exposed. It doesn't matter where a big bank is located - if it fails it will be another Lehmans & worse & Johnny Public will pay for it all.

The current indices & other data do not show the effect of Brexit. With uncertainty & devaluation currently being the main influences & we still have 2.5 years of that & then a long road to recovery there is much anguish for normal people ahead.

I am not surprised with the current indices & other reported data.

The influence of the Brexit decision & consequent devaluation of the ? [down 20% from this time last year & down 17% since 22nd July - still trending downwards despite improving by 1.5 cents over the last three days & expected to travel south over the coming months, has yet to come through to impact the real economy - where you & I live.

The only real measurable advantage that has come out of devaluation is for tourism including retail tourism but that is dependent on fuel prices holding low. Any increase in fuel prices will increase airfares & dampen the current buoyant tourism inflows.

The devaluation of the ? has mixed influences - it makes exports cheaper but imports more expensive. The UK imports most of it's raw materials & energy & as these constitute the greater cost of production the advantage is largely eroded. When you add on the extra costs of promotion & export administration the margin will be negligible so no big advantage here. This is just some feel-good spoof that the Brexiteers are using to pump up the spirits of a depressed people.

The idea that the UK are going to have a boom in sales through having our own agreements is risible as most serious UK companies are already trading as hard as possible with every market in the world. At best the increased sales will be marginal and couldn't possibly substitute the potential loss of sales within Europe.

The EU is not so exposed to loss of exports to the UK as might first be thought. The EU can substitute across the 27 countries by eliminating goods exported from the UK & cross-substituting to make up exports to the UK. For instance Ireland exports about Euro1.5 billion of beef to the UK but the UK exports about ?900k of beef to Germany - so Ireland can make up its lost market by selling the UK complement of exports to Germany & probably maintain the balance of exports to the UK anyway, so no loss, just a realignment of marketing effort. So this card is a low value card for the Three Brexiteers to play - the Europeans are very aware of this and working on it as we speak. They ain't so stupid as Davis, Fox &Johnson seem to think & they are working more positively in a coordinated effort to mitigate the effect of Brexit. There is no way the Germans, French & others will relent on services passporting & the single market without free movement & budget contribution - this is just a hallucination that the Brexiteers use to convince each other that they made the correct decision, basically latent diffidence. With the upper-class medieval twit Jacob Rees-Mogg insulting the influential Elmer Brok [current Chairman of the European Parliament Committee on Foreign Affairs]by calling him a know-nothing - this doesn't help the UK case.

The current indices have been derived from old data. There is a considerable lag in the effects of devaluation & uncertainty that will be added to by adverse trading conditions with Europe. Plus the foreign suppliers currently have their own problems and are not passing on current cost influences in order to maintain turnover in a very challenging environment at home & globally.

Commodities & energy prices are currently abnormally depressed due to overstocking because of running supply contracts & reduced demand, the same applies to shipping prices; this can change rapidly as other countries will experience improvement in trade. There is a knock on effect in wholesale prices, prices of intermediate goods & finished consumer goods. The current accrued level of inflation computes at about 7% & this can rise higher as world demand will increase with consequent increases in raw materials, energy & shipping rising with demand. The devil is in the detail. Money talks, bullshit walks.

Consumer Price Index - measures price changes at consumer retail level using a basket of goods approach. It is essentially a manufactured number. The core rate also includes volatile energy & food prices & possibly intentionally understates inflation as [for instance] it includes less-costly substituted items such as the price of a cheaper alternative similar item as buyers react to price increases. It might be added that the government constructively understates inflation as it uses CPI to adjust various welfare payments. Higher Input Prices at +7.2% in September plus energy price increases [& more to come] is certain to put upward pressure over the coming months & years - it is a one-way expectation for the forseeable future. Couple that with the continuing wage squeeze & depressed annuities, the future is not so rosy as Quids & Rook would like us to believe.

Consumer trends & Consumer spending reports [barclays] - these show that spending increased after Brexit decision. It measures the past and cannot measure what the future might hold. Anecdotally & from informed sources suggest that consumers will hold back on spending after January 2017 & well into the next 2.5 years as uncertainty continues. Jobs, prices & even increased taxation & reduced government services [that will be substituted by private purchase elsewhere] are a risk so in general people will be prudent & avoid unnecessary spending.

Enjoy this Christmas because the next few years are going to be exciting for most UK residents.

[????]

Wall of text!

MY bit on PMI

> The biggest downers in data are consumer

> confidence & PMI but BOTH are survey data based on

> sentiment, which given the apocalyptic warnings

> pre-referendum were not likely to be up - but

> still of concern I'd agree. Uncertainty/sentiment

> still the issue not reality

I agree with you on PMI......remind me what has happened with that (PMI) since July? :) (and Consumer Confidence).

[????]

The problem I have with your analysis Lordship - is that you keep changing your tune. At first you said we had no data but you early reads on 'your model' were for calamity - and now almost all the data is better than expected, you are concentrating on the one bit that isn't - the ? and making general comments about QE that are true and true globally and bugger all to do with Brexit. You are then going into conjecture about what consumers will be doing next year - which is, after all, just your opinion.

For clarity, I voted remain, i too see uncertainty (it's not a difficult thing to predict) and think things would have been better if we'd stayed but the data, that you implied was so important when you started your analysis immediately post Brexit, is by an large pretty benign THUS FAR.

I am a layman with interest in economics you are a self-claimed pro, but your predictions have been wide of the mark TO DATE . Of course no-one knows what the future may hold but your early predictions look over pessimistic to where we are now.

I see some inconsistencies in your arguments, which feel more political that sound modelling - which is a pretty dismal science anyway! You have a slightly I am an expert style of posting when so far you haven't demonstrated much! I enjoy our debates so don't take this personally - more like an online chat over a virtual pint :)

[steveo]

You'd better get up the virtual bar, it's gonna be a long night

[Lordship 516]

???? Wrote:

-------------------------------------------------------

> Wall of text!

>

> MY bit on PMI

>

> > The biggest downers in data are consumer

> > confidence & PMI but BOTH are survey data based

> on

> > sentiment, which given the apocalyptic warnings

> > pre-referendum were not likely to be up - but

> > still of concern I'd agree.

> Uncertainty/sentiment

> > still the issue not reality

>

> I agree with you on PMI......remind me what has

> happened with that (PMI) since July? :) (and

> Consumer Confidence).

Sorry about the length - cannot communicate detail in soundbites or quips..!

On PMI - don't just read the headline figure [which is pretty good - for now] - also have a look at Manufacturing Input Prices rose 7.2% in the year to September 2016 & this doesn't include energy or shipping costs. Many of the inputs are on existing contracts which when worked through will attract quite substantial increased costs and will likely be negotiated with Price Variation clauses to allow for currency fluctuations.

Costs over the next year for industrial imports [raw materials, components etc] are expected to be in the range of somewhere in the order of 7% to 15% higher as a baseline. Add energy & shipping increases to that and exports will suffer even in the medium term.

Consumer confidence has been stoked up by the Brexiteers using unsubstantiated criteria and baloney - when the increased costs, more wage squeezes, very low interest rates [or none] on deposits & poor annuity values start to bite then this confidence will soon evaporate.

Not what I would wish for but we have to make allowances for reality. 2017/2018 are not going to be years anyone will want to remember. The well off will say it is worth it for a better future - the less well off will just have to grin & bear it.

[????]

To quote you

"The PMI figure is one of the most reliable indicators that has consistently predicted economic performance - fact not opinion. Much of he reporting is qualative but it is reported by experienced professionals and is segregated between large, medium & small companies so it is a serious and dependable index worldwide"

So is this true or not? Because it's bounced back for Services, Manufacturing and Construction and above predictions.....

Consumer confidence is what it is, a measurement of where sentiment is RIGHT NOW, whether stoked or false but now up again - next year may well change I suspect that it will but that's an opinion and interest rates have been low for years and that's positive for many consumers, annuities only effect the retired, so don't see how these will effect consumer confidence materially as you state above - not much logic in your argument here, again. In fact if inflation goes up interest rates more likely to rise and my feel is that will actually have a negative effect on consumer confidence.

Uncertainty remains things may well get worse - my opinion (too) but the fact thus far haven't chimed with your earlier analysis on where we are now.

[Lordship 516]

???? Wrote:

-------------------------------------------------------

> The problem I have with your analysis Lordship -

> is that you keep changing your tune. At first you

> said we had no data but you early reads on 'your

> model' were for calamity - and now almost all the

> data is better than expected, you are

> concentrating on the one bit that isn't - the ?

> and making general comments about QE that are true

> and true globally and bugger all to do with

> Brexit. You are then going into conjecture about

> what consumers will be doing next year - which is,

> after all, just your opinion.

>

> For clarity, I voted remain, i too see uncertainty

> (it's not a difficult thing to predict) and think

> things would have been better if we'd stayed but

> the data, that you implied was so important when

> you started your analysis immediately post Brexit,

> is by an large pretty benign THUS FAR.

>

> I am a layman with interest in economics you are a

> self-claimed pro, but your predictions have been

> wide of the mark TO DATE . Of course no-one knows

> what the future may hold but your early

> predictions look over pessimistic to where we are

> now.

>

>

> I see some inconsistencies in your arguments,

> which feel more political that sound modelling -

> which is a pretty dismal science anyway! You have

> a slightly I am an expert style of posting when so

> far you haven't demonstrated much! I enjoy our

> debates so don't take this personally - more like

> an online chat over a virtual pint :)

I respond to stock market comments as you and others use it to somehow demonstrate that the economy is doing well - now you suddenly declare it has nothing to do with Brexit or the economy,that it is a global phenomenon which I agree with. However Carney further stoked the Stock Market by issuing more QE in order to stave off some of the worst effects of Brexit so for the UK it was a Brexit event albeit tangential. I have always held the view that the stock market has little to do with the real economy as it is essentially a gambling saloon - in fact traders use Monte Carlo simulations to test long term stock market returns. I also use it for testing pricing strategies.

At the moment we don't have enough resilient data [much of it rolling data since before July 23rd] and also sufficient time hasn't passed to allow many of the effects of Brexit to work through the economy. The first real data will come about March of next year - just when May expects to deliver the Article 50 notice. Added to that the good ship May is directionless and the blokes at the helm are vying with each other as to which direction to steer the ship. They cannot even agree on what crew they want onboard. Uncertainty breeds a bad economy & this administration is one of the worst I have experienced - worse than Heath or Major for dithering whilst showing all the unwarranted self-confidence that is cultured within the walls of the likes of Eton & Oxbridge. All mouth & no trousers.

Modelling only informs & defines parameters and of their own cannot forecast actuals. They mostly tell us what will not or what cannot happen. If you like they give us a cap & a collar within which we can then use other methodologies to develop strategies for careful management of any given situation. Agent based modelling for segments of the economy on the other hand can give us very accurate forecasts but only for limited purposes & in quite defined circumstances.

I deal in "what ifs" every day but unfortunately I am confronted with too many "ifs" & "buts" that are too obscure at present to even define which makes any judgement pretty impossible to normalize.

The message from the Brexiteers is confusing & is diametrically opposed to the noises coming from Brussels. The Brussels guys have their own problems but if they capitulate to the demands of the Three Brexiteeers & Rees-Mogg then their problems will multiply ten-fold & more so the Brexiteers will have to accept whatever Brussels will dictate and Brussels will have to take the consequences on the chin also.

My " conjecture" about consumer behaviour is more than that - I exchange views & news with other people who practice economics arena & we try to reach a consensus about what is happening not only using raw data but also using feedback & reporting from various official sources. This informs our views. Already there is a slowdown in new house purchase and developers have reduced their activity. Many major projects such as the Battersea project are engaging in a concerted sales efforts in China, Singapore & elsewhere and offering "special" discounts & payment terms in a desperate attempt to keep the momentum going. I visited their sales office in Shanghai and I am inundated with offers on a daily basis - discounts, extras, delayed payments - anything for a signature. More of this will happen over the next two years.

My original analysis still stands - all that has happened are some random events that could not be forecast as in consumers taking no notice of the impending recession & taking advantage of discounting by the retailers. This phase will come to an end and even retailers are forecasting this to happen early next year. I have clients who are suppliers whose orders have been cut by European [including UK] retailers by as much as 40% with prices slashed & shipping refills via more costly means [air cargo] rather than hold stock in their warehouses that won't sell & go out of fashion or technologically out of date.

As to my expertise - I doubt myself every day & revisit my work with self criticism which is much more harsh than you could ever vent on me :)) I have to be aware of the political influences and this causes me to make comment - much of the time I am trying to gain some clue as to what these clowns are going to do next. How can you or I know if they don't know themselves..? This is our quandary - in an uncertain world they give us more uncertainty.

[Lordship 516]

???? Wrote:

-------------------------------------------------------

> To quote you

>

> "The PMI figure is one of the most reliable

> indicators that has consistently predicted

> economic performance - fact not opinion. Much of

> he reporting is qualative but it is reported by

> experienced professionals and is segregated

> between large, medium & small companies so it is a

> serious and dependable index worldwide"

>

> So is this true or not? Because it's bounced back

> for Services, Manufacturing and Construction and

> above predictions.....

>

> Consumer confidence is what it is, a measurement

> of where sentiment is RIGHT NOW, whether stoked or

> false but now up again - next year may well change

> I suspect that it will but that's an opinion and

> interest rates have been low for years and that's

> positive for many consumers, annuities only effect

> the retired, so don't see how these will effect

> consumer confidence materially as you state above

> - not much logic in your argument here, again. In

> fact if inflation goes up interest rates more

> likely to rise and my feel is that will actually

> have a negative effect on consumer confidence.

>

> Uncertainty remains things may well get worse - my

> opinion (too) but the fact thus far haven't chimed

> with your earlier analysis on where we are now.

I suggest you read the full Construction PMI report which states that only 45% of respondents forecast a rise in output and also that the degree of confidence remained softer than that seen at the start of 2016.

"annuities only effect the retired, so don't see how these will effect consumer confidence materially as you state above" Are retired people not consumers..? Retirement spend in the UK [direct & indirect] is a significant component of the economic mix and any reduction in their income impacts considerably as retirees tend to spend most of their current income as & when they receive it.

I expect my earlier analysis to start coming through in the real economy in the 2nd to 3rd quarter of 2017 - I hope I am wrong but fear that my analysis [& others] will prove to be correct. What could stop it would be a wonderful Christmas present fro Brussels but that is unlikely to happen..!

[????]

So , the PMI index isn't as relevant as the 'full report' - there are some inconsistencies in your arguments

In fact the topline PMI for construction in September was 52.3 in September - way above forecast and signifying growth. This mirrored higher than expected PMI in both Manufacturing and Services too and, as an economist like you knows, construction is the smallest of these three. As you said just yesterday:

"The PMI figure is one of the most reliable indicators that has consistently predicted economic performance - fact not opinion." Have you changed your mind since?

Basically what I am saying is , and I think you'd have to agree, that THUS FAR - almost all key economic data is above consensus economic expectations at the time of Brexit

- Employment

- GDP

- PMI in all 3 secrets

- FTSE

We are doing better than most economists (and you) thought AT THIS POINT. The early reads on yours and others models haven't proved very accurate YET.

[Henry_17]

?,

But what about the MILLIONS of Britons for whom it is going to cost more to go on holiday? ??

[red devil]

???? Wrote:

-------------------------------------------------------

> We are doing better than most economists (and

> you) thought AT THIS POINT. The early reads on

> yours and others models haven't proved very

> accurate YET.

Isn't that more to do with that A50 still hasn't been triggered yet?

Maybe those economists (and Lordy) had made the assumption that A50 would be triggered soon after the vote when they made their initial predictions post-referendum.

I'm sure once A50 is invoked and we THEN start to learn how hard Brexit is going to be, lots of proverbial will begin to hit the fan...

[????]

We knew that on day 1 post-Brexit though RD, - don't disagree on the general point.

[????]

Henry_17 Wrote:

-------------------------------------------------------

> ?,

> But what about the MILLIONS of Britons for whom it

> is going to cost more to go on holiday? ??

Though not an economist, I'll keep away from the Daily Mail level of economic analysis.... :)

[????]

Oh ok then - but just my opinion (Lordship can build a model)

Outcomes Reduction in Holidays overall - money spent elsewhere= good for UK economy

Holidays abroad substituted by UK holidays= Good for the UK economy

Holidays abroad remain constant but budget's taken from other spending=bad for UK economy

Holidays abroad remain constant but discretionary holiday spending reduced to compensate= neutral for UK economy

Meanwhile UK more attractive holiday destination for overseas visitors= Good for the UK economy

All in all in the 'holiday' bit a fall in the ? will probably be better (my opinion) for the UK although personally annoying and more expensive for me and family....

[red devil]

People who have been hit by the fall in the Pound will be the retired Brits who live abroad, who get their pension in ?s converted into Euros...ouch!

[Henry_17]

Quids,

Excellent analysis. It also occurred to be that after a 20% fall you should probably add another ? to prevent feeling devalued.

[Lordship 516]

Quids

Most of the available economic data is old data, rolling average data with old components, short term data [August September] so the effects of Brexit cannot yet be seen in the various indices & data due to the considerable lag effect of the Brexit decision.

Much of the business under way & orders are historical. Many manufacturing companies are still using raw materials bought at the pre-Brexit rates, some of it not yet arrived in the UK, some of it bought with hedged currency - normally these would be priced in at the value of replacement but in tough times they will just be priced at cost just to keep the company alive & retain good staff; when these influences work their way out of the system, new raw materials will have to be bought [currently projected at approx +15% average], energy prices will increase as will shipping - prices will go up. The lag period for this to change will be 6 to 12 months depending on the materials/components & their various trading arrangements.

Don't forget that the Euro is also weak with interest confirmed today to stay at 0% so the UK doesn't have the world market all to itself. There will be winners & losers [car production] on both sides but the Europeans have a broader base [c. 500 million] upon which to spread the load & they can create cross substitution amongst the 27 in a manner that the UK cannot.

Contrary to the Construction headline PMI, many projects have been shelved and new house starts have only been reported not actually happened yet. There is resistance within the buyer's market to buying now for many reasons and estate agents are historically unreliable as reporters of activity due to their propensity for puffing up the market at any time.

A more reliable measure is Travis Perkins closing down 30 locations & cutting 600 jobs "due to weak sales in its plumbing and heating division" & Chief executive John Carter said it was "still too early to predict customer demand in 2017 with certainty".

If you take a one dimensional view then & just want to feel a bit better as you sip your pint, then yes, we are doing better than was to be expected - FOR NOW. I'm all right Jack - a quid in me pocket, good soles on me shoes, kids fed & the good Lord will provide - NOT.

However, if we take this view all the time and only live for now then we would all go down the pan very quickly. We need to look ahead and see what the likely future might be. Models only show us likely scenarios.

Models are merely a tool and have to be further interrogated via other methods to test their likely outcomes. These are much more reliable in estimating the scale of the likely outcomes for the future [GDP, inflation, stagflation, employment]. The other method might be preferable - close your eyes & mind, put wet finger in the air, sit in corner of pub & sort out the world by gut feeling - most likely it is wind followed by a visit to the back room for relief - down the pan.

We did factor in A50 being triggered but the lag in doing that caused its own uncertainties, not least the Three Brexiteers bragging about the derring do that they were going to wreak on Europe during negotiations. Theresa May will today experience her own version of shit hitting her fan & find out exactly how difficult the road ahead is when she meets a very polite but very neutral & even hostile 27 other PMs.

Sweden, Denmark, Ireland & even Germany are/were the UKs natural allies [mostly for self-preservation] but even they have been pitching for over a year for relocating jobs from the UK in the event that Brexit occurs. Credit Suisse Group AG, said it would make Dublin its primary hub for servicing hedge funds in Europe and move staff from London. Morgan Stanley President Colm Kelleher, who is Irish, said his firm may make its European headquarters in Dublin or Frankfurt if a Brexit occurred. Ireland & others are bidding to take the 1,059 regulatory jobs that are in London such as European Medicines Agency (EMA)- 900 high value jobs- and the European Banking Authority (EBA)- 159 high value jobs. You can add thousands of other EU jobs that will just disappear as EU institutions close their operations down & UK workers in EU institutions start coming home. On top of this there is current resistance within European organizations in employing UK citizens due to perceived uncertainty with work visas. Tens of thousands of jobs currently in limbo but will ultimately be lost with nowhere to go.

Brexit has thrown ?1bn (?1.1bn) of European Union research funding up for grabs, and other EU universities are lobbying fast to secure a share of it - the ?350million a week will be spent many times over if the government substitutes all of the EU funding & jobs that will be lost. Thanks a bunch Brexiteers..!

On holidays abroad - economically the increased cost will have an advantage for the UK as more people will spend their money in the UK & also people that do go abroad will spend less time there so there will be a small advantage to the UK economy overall. The social impact is a different matter.

Maybe May will come back with the realization that the best thing to do would be to renegotiate joining the EU ab initio with a program of reform & the EU might listen to that rather than a Brexit but the right wing old-Empire toffs in the Tory party would have an combined apoplectic fit so a general election & mayhem.......... funny how versatile that "may" word is..!