Brexit was a surprise, to say the least! Many folks, many whom I know, celebrated the Brit’s desire to chart their own course going forward. I can certainly sympathize. However, if they thought the breaking from a hard-fought trade union wouldn’t come home to roost on their economy… well….
While the Eurozone economy is clearly improving, the UK has major issues.
Here’s from Bespoke’s morning report:
Growth of consumer credit has stalled out at
about 1.5bn GBP/month (chart) while UK mortgage
credit is in a similar position at a ~3.5bn GBP/month
run rate despite some improvement in recent
months (chart). The UK consumer is also seeing
deteriorating real incomes, which hit spending, and a
collapse to nearly zero in the most flattering version
of the savings rate (chart). We continue to view the
pace of spending from the UK consumer as wholly
unsustainable and consider a consumer-led
contraction in economic activity a when, not an if.
And here’s from this morning’s release of last month’s Zew Eurozone Sentiment Survey:
Clearly the UK isn’t sharing its to-be-ex-partners’ optimism!
Speaking of trade pacts, let’s hope our policymakers are very careful with their NAFTA “renegotiation”! Ironically, the industries the administration ostensibly aims to support stand to lose the most:
CEOs are also starting to mention Nafta on earnings calls. Profit estimates appear to reflect other factors, however, and may be the next shoe to drop. Machinery, autos, agriculture and energy appear to be the industries that face the greatest risk from Nafta renegotiations. They represent the U.S.’s largest two-way trade markets with Canada as well as Mexico.