Bosses fuming at his shifting the blame

The Prime Minister is setting out the Government’s agenda at his Party’s annual conference and using the time to try to set in motion the policies that were in the 2019 election manifesto but have been blown off course by the twin issues of first Brexit and then the Pandemic.

Johnson believes in a lower rate of taxation as a way of increasing productivity, but he fails to address the fact that by trying to put in place an economy where innovation and scientific advances are to the fore, he is effectively abandoning a large part of the workforce.

Manufacturing only makes up 20% of the country’s GDP, and that is set to fall further.

He went on to say that issues with supply chains are due to the pace of the recovery from Covid-19 and admitted that just 127 foreign lorry drivers had applied for emergency visas to return to the UK.

At the risk of upsetting part of The Conservative Party’s support, he went on to say that it is not the Government’s job to fix every problem. It is his basic belief that Government strives to perform with a light touch. However, since the election, this has been far from the case.

He has already been accused of abrogating Minister’s roles in exacerbating the current issues with a series of blunders, public relations disasters, and accusations of dithering. These errors of judgement stretch all the way back to his former chief aides 300-mile trip during lockdown.

The case of Brexit has seen Johnson try to be tough and force Brussels to bend to his will. So far this has failed and concessions over the Northern Ireland protocol will still have to be made.

The economy slowed noticeably in Q3 with expectations for GDP growth being cut across the board. The rise in wholesale gas prices will add to already rising inflation, while shortages look as if they may ring a new level of misery for Christmas.

The pound has reflected the market’s fears regarding a slowing economy while inflation continues to rise. It has studied a little since its recent fall but that is more due to a correction of the dollar index.

Yesterday, it completed its fourth daily rise in a row, but is still below the level it was a week ago.

It reached a high of 1.3647, closing at 1.3629

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Potential debt ceiling vote overshadows NFP

The threat of a default by the U.S. Government remains a serious threat with, according to Treasury Secretary Janet Yellen, now less than two weeks to go until the country runs out of money.

This is a regular occurrence which could be likened to the threat of a nuclear war where both sides know the consequences of pressing the button, and the most likely trigger being an accidental event.

The threat of a vote to not increase the debt ceiling is considered a partisan political tactic, usually used to force the administration to make concessions.

The last time this tactic was used to any effect was ten years ago. It has been threatened since, but a technical default occurred in 2011 which forced the Treasury and Fed to use their crisis playbook to produce a workaround.

Yellen went on to say that the size of the recession, should no increase in the debt ceiling be agreed, would dwarf what was seen at the start of the Pandemic with millions of jobs being lost.

The practical effect would be that welfare payments and Federal Government salaries would not arrive, and there would be a shutdown of services.

It is difficult not to be blasé about such a bout of sabre rattling, but an agreement still has to be found.

In a separate comment, Yellen appeared to withdraw support from beleaguered Federal Reserve Chairman Jerome Powell. She said that the decision on whether Powell is renominated when his term expires next February is the President’s to make.

One bright light in the gloom for Powell is that he retains the faith of President Biden, but even that may not be enough to save him if the liberal left get their way.

Data released still show the economy is performing, if not at the rate that was seen earlier in the year. Leading indicators such as PMI’s continue to show increased activity going forward.

The dollar index continues to trade in a new, higher, range, although it doesn’t look like breaking higher again without a push from Friday’s employment report.

Yesterday, it rose to 94.05, closing at 93.97 having tested the 93.80 support for a second day in succession.

ECB President watching wage developments closely

In a bullish speech that has become something of a trademark recently, ECB President Christine Lagarde confidently predicted yesterday that the Eurozone economy would reach the level it was at prior to the Pandemic by the end of the year.

There is little doubt that there has been a remarkable turnaround in the economy over the past few months, due in no small part to the withdrawal of lockdowns, the success of the vaccination programme and the rising confidence of consumers.

The rise in consumer confidence is remarkable given the fact that the logistics issue that has accompanied the recovery remains a serious issue, with goods in short supply in several members’ stores.

Ursula von der Leyen, the EU Commission President, must be relieved that her stance over the production and distribution hasn’t appeared to cause lasting damage.

Lagarde went on to sound something of a warning over inflation, which was perhaps the first time she has shown real concern. She said that the Central Bank will be closely watching inflation expectations, in particular wage demands and settlements in the public sector.

She also reiterated that many of the inflationary factors that are present in the economy cannot be affected by monetary policy and wage negotiators, on both sides, should take note of their transitory nature.

One of the policies that Angela Merkel will be remembered for when she eventually leaves office will be the tough stance Germany forced upon countries whose economies were in danger of collapse during the financial crisis.

Greece was one of the most severely affected but recent data shows that its economy has rebounded, due in the main to its taking the medicine, and enacting the reforms to privatizations, taxation, education, and public administration.

The Greek economy is likely to grow at 6% this year, with only a small reduction in 2022.

The euro remains pressured by ECB policy. Yesterday, it fell to a low of 1.1580, closing at 1.1598 with traders predicting a test of 1.1500, particularly if the Fed makes hawkish statements following Friday’s NFP.