Headlines –  “Cameron on rack over “loons” slur” - makes the headlines. Tory activists have been labelled as “mad, swivel eyed loons” by a senior Tory figure, close to the Prime Minister. Lord Feldman, staunchly denies he is a senior Tory figure, close to Number Ten and is taking legal advice. He also denies making derogatory remarks about grass roots Tory members during a conversation in a restaurant.

It could have been worse, they could have been described as “Google eyed, loons”. This  would have been perceived as a clear reference to tax dodging, work shirking, close advisers to the Prime Minister. Yes, Google insider exposes “immoral tax scam” also makes the headlines. A former Google executive has blown the whistle on a massive tax scheme by which profits on Google’s UK transactions are diverted via Ireland to Bermuda. Sales deals negotiated in the UK are technically completed in Ireland, enabling the internet giant to all but eliminate the tax bill in the UK.

Eric Schmidt, CEO of Google, is a member of the elite group of global company leaders on David Cameron’s Business Advisory Group. Schmidt advises on international tax legislation and is joined by Sir James Dyson who advises on outsourcing manufacturing jobs to the Far East. Excellent. Eric Schmidt may not make the group meeting tomorrow in London but may join via a conference call from Google HQ. A sort of air taxi dodging scheme – see what I did there!

Elsewhere, the Tory grandee Lord Howe has warned David Cameron that he risks losing control of his party over Europe. A warning that should not go unnoticed in Downing Street. Howe should know. He was instrumental in bringing down Thatcher over the very same issue twenty years ago. Old habits die hard. Grandees can bear grudges.

David Smith, “King clocks out with a spring in his step” – makes the headlines. The Governor of the Bank of England, presenting his final inflation report suggested growth will be a little stronger and inflation a little weaker than expected three months ago. The CBI suggests the economy is moving from flat to growth and the OECD suggest leading indicators point to growth at close to trend rates. Things are looking up, says the Economics Editor.

In The Saturday Economist, this week, The Inflation report is the main focus, presenting a welcome change in outlook for the year ahead. The employment figures were a little mixed and the news from Europe this week, was particularly bad with setbacks now extending to Germany and France. For more information visit the New Web Site, David Smith and Andrew Sentance now feature as guests on the site, my thanks to them.

Back to the day Job – Highlight of the week
The Annual Dinner on Thursday evening. A really lovely evening with Alistair McGowan as the star turn. More impressions in thirty minutes, than a crowd of elephants moving through the Serengeti, Alistair’s multi lingual Federer and the Murray comparison just two of the many highlights. A serene night, so calm and relaxed. My thanks to all, especially the great team at pro.manchester for making it all look so easy. Pro.manchester at it’s best, not just the black ties and posh frocks on the night.

Saturday, working in the morning, the day starts as usual with tea, the FT, and the Economist app. The Economist leads with “It’s Japan”, The new prime minister has a vision of a prosperous Japan. The economics are looking better, than Japanese jingoism, says the sage weekly.

In the afternoon, tennis a 6 – 3 win, yes it’s a win. Think again all those would be challengers!

Hope all is well, more news next week,

John
iPhone App You can now access The Sunday Times and Croissants and The Saturday Economist on your iPhone. Download the iPhone App.

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Inflation Report
Wednesday, May Inflation Report, last in the series (of 82) for Sir Mervyn King as Governor. “There is a welcome change in the economic outlook”. Projections are for growth to be a little stronger and inflation a little weaker than expected three months ago. “A recovery is in sight”. Excellent. The Governor is upbeat. The forecast is for growth – slightly above 1% for the year as a whole, with a gradual recovery thereafter.

Base rates are likely to remain on hold until 2016, inflation will moderate from the current 2.8% level but is likely to remain above target by the end of the year. This all fits nicely with The Saturday Economist outlook outlined earlier in February this year! No black clouds, no stormy water, no difficult charts to navigate, the economy is headed for a safe harbour that even a Canadian novice could pilot apparently. The King has had his day, “now it is over to the next generation to have theirs”, he added, before leaving the room with an obvious smile on his face.

Concerns about Europe
Well there are a still a few concerns about Europe! “The main downside risk to the recovery continues to stem from overseas, especially in the euro area”. So it proved with the Eurostat updates on the Euro economy mid week. Not doing quite so well, the flash estimate for the first quarter of 2013 suggested Euroland GDP fell by 1% compared to the first quarter of 2012. It is not looking too good, the pigs are breeding and heading north.

The French economy slipped back into recession with a fall of 0.4% following a similar fall in the prior quarter. Even the Germans, took a knock, with output down by 0.3% in the first three months. NIESR predicts negative GDP out turn for the Euro in the year, which fits nicely with the IMF three speed world recovery outlined recently by Christine Lagarde. Hopefully the UK is moving away for European trends and joining the Anglo Saxon growth alliance, as the US recovery gathers pace.

Employment UK
Not quite so fast as hoped, perhaps, the employment stats released on Wednesday were a little disappointing. The claimant count continued to fall into April, down by 8,000 to 1.52 million and a rate of 4.5%. The number of vacancies also increased slightly but on the  wider LFS count, the number in employment actually fell slightly in the three months to March.

That’s the great thing about the employment stats, sixty pages with something therein for politicians of any hue. For two handed economists, the data is at times indecipherable, the earnings data, incomprehensible, flat at best.

Confused? Check out The Saturday Economist web site, probably the best economics site in the UK.

What happened to sterling?
Once again, it’s all about the dollar, pushing to 103.1 from 101.5 against the yen and to 1.2838 (1.2992) against the Euro. Sterling also fell to 1.5168 from 1.5356, down slightly against the euro at 1.1811 from 1.1825.

Oil Price Brent Crude closed at $104.64 from $103.91. No impact on inflation at this level.

Markets, once again the beneficiaries of US hopes. The Dow closed at 15,354 from 15,118 and the FTSE closed at 6,723 from 6,625. Time to sell in May and go away perhaps our US readers cautioned otherwise last week.

UK Ten year gilt yields held at 1.90 but US gilt yields closed up 1.95 from 1.90. As for gold, gold closed down at $1,361 from $1,447.

That’s all for this week, don’t miss The Sunday Times and Croissants out tomorrow. The Saturday Economist.com is mobile friendly, no need for a special app any more!

Join the mailing list for The Saturday Economist or forward to a friend to let them share the fun! Don’t forget to check out the new web site The Saturday Economist.com.

John

The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The receipt of this email should not be construed as the giving of investment advice. It’s just for fun, what’s not to like! Dr John Ashcroft The Saturday Economist.

Headlines –  “Tory civil war erupts over Europe vote” makes the headlines. David Cameron is facing a new bout of civil war in the Tory party as ministerial aids prepare to back a motion condemning the Queen’s speech. The speech failed to include a bill on the EU referendum. Shocking! Chris Grayling, the justice secretary, firmly on the EU sceptic wing of the party, considers Gordon Brown’s decision to sign the Lisbon treaty was a disaster for the country. Oh dear.

How do you start a rice pudding race, say go, was the play ground chant. How do you start a war in the conservative party, shout Europe, it never fails to lead to a challenge for the leader. The problems pre date the Lisbon treaty, beyond Maastricht. In fact, things were much easier for the Tories when DeGaulle just said no.

“Pregnant women will be tested for smoking” makes the front page. All pregnant women will be asked to take breath tests for carbon monoxide to check if they are telling the truth about smoking, or living in London perhaps. The nanny state moves ever forward. Women found guilty of smoking after intercourse will have their babies confiscated and sold overseas to bring down welfare costs as part of a new Inane Duncan Smith initiative. “Smoking during pregnancy reduces birth weights and this will bring down prices achievable in the current market” said a government spokesman, “nevertheless this is a step forward to reduce the burgeoning cost of the welfare budget”.

The Royal College of midwives, said testing for Carbon Monoxide was ill judged and could  damage relationships with expectant mothers. Midwives should not be seen to be policing pregnant women and testing for fags. Quite.

David Smith, “Central bank money is driving the stock market boom” is the feature of this week’s article. The Dow has pushed above 15,000 for the first time and the FTSE has pushed through the 6,500 ceiling closing at 6,624 last week. Monetary policy can’t get more accommodating as we explain in The Saturday Economist this week. DS believes the markets are ahead of fundamentals and may be vulnerable to set back on any change in a central bank stance.

Economics news, base rates were kept on hold and manufacturing output continues to disappoint. Trade is no aid to the UK economy as the March figures demonstrate. We are still confident about growth this year, check out The Saturday Economist for details and check out the new web site, The Saturday Economist.com. All the economics you will ever need!

Back to the day Job – Highlight of the week –
The Marketing Manchester board meeting on Thursday, the last in the series for Nick Johnson as Chairman. The meeting was followed by dinner as guests of the Midland Hotel and Simon Rogan, the two Michelin starred chef, owner of L’Enclume in the Lake District. Great way to thank Nick for his tenure at MM. Excellent.

Saturday, working in the morning, the day starts as usual with tea, the FT, and the Economist app. The Economist leads with “Wall Street is back”, American Investment banks dominate global finance once more! It is, as if they have never been away, that’s because they haven’t!

In the afternoon, tennis a 4 – 6 set back – no emails please.

Hope all is well, more news next week,

John
iPhone App You can now access The Sunday Times and Croissants and The Saturday Economist on your iPhone. Download the iPhone App, it’s FREE!

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Economics news – Base rates
Base rates were left on hold this week and QE spending was held at £375 billion. Real rates adjusted for inflation, are minus 2.3%. Factor in QE allegedly worth a further 4% in rate cuts and monetary policy cannot be more accommodating. Don’t place too much hope on a change in policy when the Canadian comes. Other than flying around in a helicopter, throwing out cash, along with a nominal GDP target, there is not much more the Canook can achieve. As for forward guidance, watch out for the progressive rise in bond yields in the months ahead.

Manufacturing figures were released for March, not much in the data that had not already been factored into the GDP figures for the first quarter. The output index increased to 104.0 from a dismal 102.9 in February. Don’t get too excited, output in the month was down by 1.4% compared to prior year and 3% for the quarter as whole, slightly worse than first thought. The Prime Minister’s plan to re industrialize Britain must be scheduled for later in the year as the march of the makers, rebuilding the work shop of the world is on the back foot once again. Our forecast for the year is for a fall in manufacturing output over the year of around 0.5%, offset by growth in the service sector. We still see positive GDP growth of plus 1% for the year ahead.

Trade figures in March, suggest more of the same disappointment to the rebalancing agenda. Trade is no aid to the UK economy. The trade in goods deficit in March was £8.9 billion in March, offset by a surplus in services of £3.0 billion. For the quarter as a whole, the trade in goods deficit was £25.9 billion in line with our forecast for the year as a whole of around £106 billion. The service sector surplus in the quarter was £17.4 billion, slightly down on last year’s figure but no need as yet to adjust our forecast for the year of around £75 billion. The overall deficit easily financed and placing no great pressure on sterling. No surprises in the latest data set but a wake up call to misdirected policy hopes.

What’s happening in the car market? Registrations in the first four months are up by almost 10%. We are increasing our forecast for the year to just under 2.2 million units. Despite growth in car manufacturing output, the trade deficit will continue to place pressure on the trade figures, the UK will import amost 2 million cars this year.

For more information on this and more check out The NEW Saturday Economist.com web site or follow the professor @satdayeconomist. All the economics you would ever want to know!

What happened to sterling?
The dollar made the news this week, pushing to 101.5 against the yen and to 1.2992 against the Euro. Markets just love the Japanese monetary expansion. Sterling slipped as a result of dollar strength, falling to 1.5356 from 1.5563 against the dollar but unchanged against the euro, 1.1825 from 1.1863.

Oil Price Brent Crude closed at $103.91 from $104.2. No impact on inflation at this level but no evidence of surging world trade either.

Markets, were the beneficiaries of US hopes as the Dow closed above the 15,000 level at 15,118 from 14,974 and the FTSE closed at 6,625 from 6,521. Soon be time to sell in May and go away but don’t buy gilts on the way out.

UK Ten year gilt yields increased to 1.90 from 1.75 and US gilt yields closed at 1.90 from 1.74. As for gold, gold closed at $1447, ever seen a hung chart? Check out the gold price on The Saturday Economist web site.

That’s all for this week, don’t miss The Sunday Times and Croissants out tomorrow. 
Download The iPhone App, check out our news on the move.

Join the mailing list for The Saturday Economist or forward to a friend to let them share the fun! Don’t forget to check out the new web site The Saturday Economist.com.

John

The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The receipt of this email should not be construed as the giving of investment advice. It’s just for fun, what’s not to like! Dr John Ashcroft The Saturday Economist.

Headlines –  “Royal Society bust up over Andrew” makes the headlines. Some of Britain’s leading scientists are in revolt over the election of Prince Andrew as a fellow of the Royal Society because of his “over colorful past” and lack of a scientific background.

It’s not so much the marriage to Fergie or the lack of qualification that appears to be the problem. The Royal Society used a ballot paper that allowed delegates to vote only “Yes” and nothing else. “A ballot where you can only say yes, is a bad idea”, said Lord May, a former president. Clearly a peer, sitting in the other place, with a sound grasp of democracy. Even so the Duke could secure no more than 11% of the vote – still enough to get elected.

Not so UKIP, gaining 25% of the vote would not guarantee election for the party of protest in a UK general election. Why not? A platform based on not allowing East Europeans to smoke in pubs will need greater elaboration before polling day. Nicholas Farage, clutching a pint and smoking a fag, presents a better “man of the people” image than David Cameron. UKIP needs “seats in the house, not stools in the pub” to have a real impact.

The Prime Minister is not assisting the image race with an impression of Lord Snooty and his pals, according to the Sunday Times Leader. More Old Etonians have been invited to the chum-ocracy at Number Ten. An obvious attempt to shake off the “Two Posh Boys” tags for the Chancellor and PM, appears to have back fired.

We would do deal with Boris not Cameron, says Stuart Wheeler, the UKIP banker. Farage will forge an alliance with Johnson to form coalition, if elected. A sort of fags from Eton ticket! Two fingers on the nuclear buzzer, vote for Boris Farage, excellent.

David Smith, “Britain discovers a world outside the eurozone” the headline in this week’s Economic Outlook. The UK is growing exports to countries outside of euroland. No real surprise – trade follows growth. Interesting, denominated in dollars, exports have not required a debasing of the currency to generate volume and maximise revenue. Lessons from history and The Saturday Economist this week.

Economics news, growth continues into April according to the latest survey data. Markets rally to new highs, The Saturday Economist asks “Is it time to full your boots with green shoots?”. Don’t miss this week’s edition.

Back to the day Job – Monday – team meeting in the morning, then in the afternoon, the chairman and I meet with David McKeith and Clive Memmott from the GM Chamber of Commerce.

Tuesday – haircut and internal meetings!

Wednesday – coffee with Adrian Berg in the morning, then sign off meeting with the auditors in the afternoon,

Thursday, conference call with the Isle of Man office in the morning, planning a trip to Manchester in June. Later, Jonathan Diggines is in the office, for tea and catch up, always a great pleasure.

In the evening, dinner to meet John Cridland, Director General of the CBI as a guest of Simon Allport and Ernst and Young. Really good evening, Sir Richard is on the table, along with the soon to retire Ken Williamson and the great champion of UK manufacturing, Juergen Maier, from Siemens. Good fun.

Friday, day off, which means, the emails stop slightly earlier in the day.

Saturday, working in the morning, the day starts as usual with tea, the FT, and the Economist app. The Economist leads with “China, the return to greatness, let’s party like it’s 1793”. A reminder to finish my “return of the Middle Kingdom” paper. China has been a dominant world player before. I knew that!

In the afternoon, no tennis but we plan an outing on court later today. The best way to avoid publishing the result.

Hope all is well, more news next week,

John
iPhone App You can now access The Sunday Times and Croissants and The Saturday Economist on your iPhone. Download the iPhone App, it’s FREE!

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Economics news – latest data suggests the UK recovery continued into April, on the back of strong service sector growth. The FTSE 100 closed above 6,500 as global stock markets rallied following US jobs data. The Dow closed above 15,000 for the first time in history and the S&P index pushed through the 1,600 point barrier. Fill your boots with green shoots?

US non farm payrolls increased by 165,000 in April according to the US labor department ahead of consensus expectations of around 145,000. Of itself not a great number but enough to convince the US and world recovery is on track.

In the UK, the influential Markit/CIPS UK PMI® data series were released this week. Service sector growth improved again in the month of April. Businesses recorded the fastest increase in eight months, as new business orders increased. The Key Business Activity Index rose to 52.9 from 52.4 in March. The service sector measure has been in positive territory since the beginning of the year, with a steady increase month on month.

Not so the manufacturing sector, manufacturing “stabilized” in April, as the key activity index hit 49.8 marginally below the steady state level of 50.0. New orders increased for the first time since January pushing the index up from 48.6 in March, better but not yet growing.

In construction, output was in negative territory for the sixth month in succession. The index recorded a level of 49.4 up from the 47.2 level recorded in March. Some improvement in housing activity was evident but commercial and civil construction activity remained muted.

So what does this mean? Well, for the year as a whole we are sticking with our GDP growth forecast of plus 1% growth. Service sector growth is the key to recovery despite the weakness in manufacturing and construction. Is Plan A on track? Hardly.

The requirement for some boost to capital spending remains. The reintroduction of public sector infrastructure projects with some boost to housing both public and private, the key to construction and to a lesser extent manufacturing recovery.

In Europe the ECB slashed rates, a little late in the cycle, by 25 basis points. In Canada, Mark Carney, the soon to be governor of the Bank of England, gave some guidance – on forward guidance.

“To reflect fully financial markets dynamics, the deceptive simplicity and elegance of complete markets operating in linear, rational expectations environments must give way to the chaotic reality of heterogeneous beliefs, risk taking behaviour, feedback effects from excess leverage, endogenous uncertainty and a non trivial role for financial intermediaries”. That’s “difficult to pronounce”, admitted the Governor. Well at least they can spell it. Excellent.

What happened to sterling.
Sterling rallied on the news, against the dollar closing at 1.5563 from 1.5450. Britannia continued to battle against the Euro, unchanged at 1.1863 from 1.1877.

Oil Price Brent Crude closed up $104.2 from $103.3.

Markets, The Dow closed up at 14,974 from 14,712 and the FTSE closed at 6,521 from 6,426. UK Ten year gilt yields increased to 1.75 from 1.70 and US gilt yields closed at 1,74 from 1.67.

That’s all for this week, don’t miss The Sunday Times and Croissants out tomorrow.
Download The iPhone App, check out our news on the move.

Join the mailing list for The Saturday Economist or forward to a friend
UK Economics news and analysis : no politics, no dogma, no polemics, just facts.

John

The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The receipt of this email should not be construed as the giving of investment advice. It’s just for fun, what’s not to like!

Headlines –  “Cameron beckons Boris back” – makes the headlines, David Cameron has strengthened his embrace of the Johnson family – leaving the door open for Boris Johnson to return as an MP before the next election. Asked if Johnson could combine the role of mayor of London with being an MP, the PM said, “Boris can do anything, I love Boris”. Clearly love is in the air in the Conservative party, the Prime Minister insisted he felt nothing but warmth and friendship from his backbenchers. Excellent. So much for sensitive political antennae.

Yes, the Johnson family - like London buses, you wait for ages then two come at once. Last week brother Jo was appointed as head of the policy unity at  Number Ten. Asked if Boris could get the top job in Downing Street one day, the Prime Minister said, “I’d never want to put a limit on what Boris can achieve”.  Yes “even my job, even though he didn’t get a first at Oxford”, the clear message.

Well, trying to re-industrialise Britain, the stated aim of the Prime Minister may be a bit too much for any man as last week’s GDP figures attest. The march of the makers, tripped up again, it is time to rebalance the thinking in Downing Street about how to grow the economy.

Elsewhere on the front page, General Sir David Richards, the UK’s top gun and chief of defence staff, warns that military intervention can lead to war. Ah yes, lessons from history, and a clear benefit of Sandhurst training. The military are getting nervous about a planned military response to the alleged use of chemical weapons in Syria. It’s OK to bomb, shell and maim but a shot of Sarin is a dose of corrective medicine too far. Just make sure we have the evidence first. “Intervention would have to be on a huge scale, over a prolonged period of time, to guarantee lack of success, over the medium term”. The real lesson from history.

David Smith, blogs “A little growth takes a lot of pressure off Osborne”. The GDP figures were released this week confirming growth in the economy. Even so, critics of austerity should not ignore the true horror of our debt”, the headline in the Business Section. The budget deficit is inching lower but the overall level of debt is still rising fast. Growth figures announced this week, confirm there is no triple dip recession but those who would advocate higher spending and a lower rate of austerity cut backs should beware of the dangers of short term fillips to growth, warns the Economic Outlook.

Economics news, yes, this week, the preliminary estimate of GDP in the first quarter of 2013 was announced. No triple dip and in fact no double dip according to the latest revisions to the data. Does this mean Plan A is putting the economy back on track? Not really, check out “The Saturday Economist – “No triple dip, is Plan A hip?” for more detail.

Back to the day Job – Monday team meeting in the morning, meet with the auditors, followed by a meeting with directors Sara Baines and Deborah Ascott-Jones to discuss committee protocols and procedures. Agree to attend certain committee sessions, the outcome.

Tuesday, cancel a visit to London, to meet with LSE professors and the City Independent Economists Groups. Instead have a Finance Committee meeting to resolve the budget for 2013/14.

Wednesday – early morning economics presentation to the client group of RBS Invoice Finance. Quick run through the sixty odd slides now forming part of the presentation. Good stuff.

Thursday, GDP stats released at 9:30. Concerns of double dip allayed on the Alan Beswick show on Radio Manchester. Some confusion as I am asked to provide some comment and comfort on the measles epidemic. The trials of being a doctor! Later appear as sage, on the mid morning programme, forecasts completely right, as always! Business Development Committee in the morning, good session to run through the agenda for the months ahead. Lunch at the Lowry with the BusinessDesk Awards session, later a meeting with MIDAS and potential new arrival from across the Irish Sea.

Friday, deliver the Keynote address at China India session for UKTI hosted by DLA Piper. David Gray opens and does the warm up act. Excellent. Can’t make the Chancellor’s address at the launch of the Manchester China Forum, take a consolation coffee at Carluccio’s with Clive Memmott, CEO of the GM Chamber of Commerce.

Saturday, working in the morning, the day starts as usual with tea, the FT, and the Economist app. The Economist leads with “Generation Jobless”, the number of young people out of work across the globe is nearly as large as the population of the USA! No time for police and military cut backs!

In the afternoon, no tennis this week. At any one time 24% of the athletes are off the PTA circuit through injury. Mary and I take time off in support.

Hope all is well, more news next week,

John
iPhone App You can now access The Sunday Times and Croissants and The Saturday Economist on your iPhone. Download the iPhone App, it’s FREE!

Join the Mailing List for the Sunday Times and Croissants or forward to a friend, all are welcome!

Baffled by Social Media check out our new site. The Social Media Experts Campus. The Professor and his faculty team are there to advise.

GDP Q1, growth was up 0.4% quarter on quarter, good news for economy and for the beleaguered Chancellor. Compared to prior year, Q1, growth was up by 0.6%. Exclude manufacturing and construction and the economy grew at a rate of 1.5%. Green shoots, no black clouds! Excellent.

Yes, on Thursday the ONS released the preliminary estimate of GDP for the first quarter of 2013. The UK has avoided a triple dip recession. Actually for pedantic purists, the UK has avoided a double dip recession and a triple dip recession. The economy has not experienced two consecutive quarters of negative growth, year on year or even quarter on quarter for that matter, according to the latest revisions to the GDP data.

The economy is “healing”, said the Chancellor, suggesting HM Treasury is populated by paramedics rather than PhDs. Just as well with an average age of 32 and a staff turnover of 25%, the Treasury is coping with the challenge of growth and austerity.

In the first quarter of the year, output in the manufacturing sector fell by almost 2.5% and in construction, output fell by almost 6%. Churlish to mention the promised march of the makers rebuilding the workshop of the world and so much for rebalancing the economy.

Growth in the economy came from the service sector, led by distribution, hotels, leisure, business and financial services. The great thing about a Golden Goose is that it keeps on laying, with the correct diet and regulatory regime. It is time to nurture not neuter the service sector economy, especially business and financial services.

The economy is recovering from the first onslaught of austerity programme, a classic recovery in 2010 was hit badly by spending cuts, public sector lay offs and the VAT hike. Time for caution now as the IMF suggested last week. The Chancellor has offered some flexibility with Plan A, a sort of austerity with dexterity! No need for a step change in policy.

Some nudge to investment in infrastructure and housing would assist the gloom in construction, provide a modest fillip to manufacturing and assist the recovery in the service sector. It might even improve the poll ratings with two years to go to an election.

For the year as a whole we are sticking with our growth forecast of plus 1% growth, the OBR latest estimates may prove too pessimistic.

What happened to sterling.
Sterling rallied on the news, up from 1.1656 to 1.1877 against the euro and up to 1.5450 from 1.5229 against the dollar. The dollar closed unchanged against the euro at 1.3031. Markets responded well to the GDP data.

Oil Price Brent Crude closed up $103.3 from $99.65, prices below $100 were making us nervous.

Markets, The Dow closed up at 14,712 from 14,547 and the FTSE closed at 6,426 from 6,287. UK Ten year gilt yields increased to 1.70 and US gilt yields closed at 1.67 from 1.70. Negative real rates for the UK debt management office but the FTSE should retest the 6500 level before the May bank holiday.

That’s all for this week, don’t miss The Sunday Times and Croissants out tomorrow.
Download The iPhone App, check out our news on the move.

Join the mailing list for The Saturday Economist or forward to a friend

John

The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The receipt of this email should not be construed as the giving of investment advice.

No more money is going to the Conservative Party, beneficiaries of £10 million to date. The former Tory Treasurer will not help to fund the next election campaign. Michael and I met, as part of the 1980s brat pack, which included Nigel Rudd, Roger Carr and Richard Branson. All now, knights of the realm. So much for being Thatcher’s favourite business man!

Michael once hosted a dinner at Scotland Yard as part of his Crimestoppers launch. A visit to the Black Museum part of the evening entertainment. The Black Museum is a famed collection of criminal memorabilia dating back to 1874. It includes objects from the Jack the Ripper and Dr Crippen cases. Exhibits include a pair of binoculars from which a pair of spikes shoot out to blind the user, as the lenses are adjusted to improve vision and focus. A parable on the dangers of perception perhaps and …

Obviously a warning to the Chancellor of the Exchequer as the problems in the economy sweep into focus. Jenni Russell, writing in place of Dominic Lawson this week, advises George Osborne to shed another tear and admit that austerity isn’t working. Apparently the Chancellor shed a tear at the funeral this week, overcome by emotion or news of the Fitch downgrade, we can’t be sure. Nevertheless, latest news on unemployment and the IMF caution, suggests it is time for a rethink on policy. Especially with regard to infrastructure and housing investment.

David Smith, suggests “low pay begins to do more harm than good”. Yep inflation at 3%, earnings at 1% result household misery. The Economics Editor suggests employers should sign up to a 3% club, offering pay rises ahead of inflation to stimulate household spending and domestic demand. Well, at least it’s better than Lord Turner’s idea of throwing cash out of a helicopter to stimulate inflation but not much. Best let the market work it out, with a little help from Treasury.

Economics news, inflation, retail sales and jobs this week, along with a downgrade of UK debt rating from Fitch plus a mild warning from the IMF about the direction of austerity policy in the UK. For more details, check out The Saturday Economist, always worth a read, even though I say so myself!

Back to the day Job – Monday -  team meeting in the morning, followed by a presentation to delegates from the Isle of Man. First team turnout with representations from all of the Manchester family players in a full day session. Great comment “It is clear that in Manchester you all know your place on the pitch and play in formation together”. Excellent.

Tuesday, Business Leadership Council meeting in the morning to discuss the Greater Manchester Strategy document. Sir Howard and Mike Emmerich in attendance, a great chance to understand and explain how the pro.manchester sector groups can assist the drivers of growth in the economy. Later Alison Small, from ABN Amro is in the office, for a coffee and catch up.

Wednesday - lunch at Barclays Wealth, a guest of Samantha Beach, a chance to listen to Kevin Gardner and Tom Elliott two great economists from Barclays and J P Morgan. Both ex LSE, and an excellent busman’s lunch. Talking of lunch…

Thursday, 150 for pro.manchester lunch at the Hilton with Charlie Cornish, great presentation from Charlie on life post the Stansted deal and clarify the rumours about a possible bid for Chicago.

Friday, meeting with Dr Kevin Albertson, economist and econometrician from MMU, later coffee with Clive Memmott, CEO of the GM Chamber of Commerce. Good stuff. In the evening a rare Black Tie dinner as a guest of Wayne Mellor and Sarah Molyneux on the Pozzoni table at the Women in Property Dinner. Great evening, I am a little shocked as the female presenters, more than a little risque, are not always and entirely politically correct.

Saturday, working in the morning, the day starts as usual with tea, the FT, and the Economist app. The Economist leads with “Clean, safe and it drives itself”, a special report on the car (not the economy) of the future, if only it were so!

In the afternoon, tennis, a  4 – 6 loss , back to reality some might say.

Hope all is well, more news next week,

John
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