Quotes of the Day: Be VERY Careful What You Ask For!

In a world where certain players are pushing protectionism, it is incumbent upon us to study its real world effects. Brexit offers us a present day analysis. 

From Bespoke's morning message:

GDP stats today showed consumption growth the lowest since Q4 2014, and we see that slowing further. There’s also been zero rebalancing of trade; since GBP (the British Pound) peaked on a trade-weighted basis in mid- 2015, real imports are up more than real exports! In other words, from a trade perspective, the weak pound hasn’t contributed anything to growth. This negative supply shock story gets at the core of why Brexit will so badly hurt the UK: it cuts the country out of supply chains that business won’t be able to re-enter simply due to lower sterling, while households bear the adjustment by reducing spending. Higher than expected investment and government spending bailed out growth, but business investment was a zero contributor after a weak Q1. The weakening UK consumer is also backed up by weak CBI retail sales volume data this morning. We continue to see GBP as overvalued.

Sadly, for the British citizen, this comes at a time when the rest of Europe is doing quite well:

In France, business confidence survey data came in broadly stronger than expected, and continues to trend towards improvement. We also note that INSEE released its survey of French industry capex (business expansion) plans today, and the expected capex total for both broad industry and manufacturers has been improving rapidly since first estimated in October 2016. 

In Spain, economic growth was unrevised at +0.9% QoQ or +3.5% QoQ SAAR (the terms US GDP are typically quoted in) for the 11th straight quarter of annualized growth faster than 2%, and 15th straight quarter of growth. Those statistics all compare favorably to US growth; the Spanish economy has now expanded as fast or faster than the US economy in each quarter since Q4 2014. The guts of the report were also positive in that most expenditure sectors grew close to the same pace as the broader economy, and virtually every category was up. 

Job openings in Sweden are up 12% YoY per the Q2 data released today, more than 4x the pace of employment growth. As a reminder: CPI is at target, industrial production is accelerating, capacity utilization is very high, the labor market is hot, and SEK remains more than 20% undervalued on a purchasing power parity basis (chart).

In Switzerland, quarterly industrial production data was out and as in the rest of the regional economy the data was good, rising as could be predicted by recent PMI improvements.