George Magnus seems to share the idea of some economic timing behind the recent announcement of a snap general election by Mrs. May.

We look at this under the lenses of the causal relationship between economic and social conditions.

Abstracts from his site, the full article can be found on Prospect :
(emphasis ours)


In announcing the June General Election, the Prime Minister assured the nation that the economy is in good shape and in good hands. She cited in particular growth that was coming in above expectations, and high consumer confidence. The March retail sales data published last Friday will not make much of a dent in the government’s election narrative, but they do warn, from an economic perspective, that Theresa May has probably timed this election to perfection. Things can only get worse.

 


The reasoning in financial markets is that May is after a bigger majority so that she can try and negotiate a soft Brexit, sidelining the right-wing of her party. Yet you could argue this the other way with equal conviction: a big majority in the Commons could allow the government to agree any form of Brexit, however bad. Or you could argue that the government isn’t really in control of the outcome of the Brexit process, anyway.

 


If you throw all these things together, you end up with two worrying conclusions. First, the economy will be generating slower rates of growth, so that in the first quarter of this year, for example, GDP will almost certainly have slowed down to 0.4-0.5 per cent—after 0.7 per cent at the end of 2016. And there’s every chance the second quarter will come in at a similar level.
Second, the economy hasn’t really got what we might call spare petrol in the tank. The household savings rate has already slumped, consumer credit and instalment debt are rising, employment levels look maxed out, and real incomes are flat or falling. 

 


Get the picture? The government’s portrayal of the economy in the election campaign won’t be so much wrong, as seen out of the rear view mirror and the side windows. The Labour Party is looking at the same things with a stronger redistributional lens, but also from a largely punitive and ideological perspective divorced from the needs of the economy. They should both turn to the front, see what’s coming and argue that we need a mitigation strategy to deal with the consequences of Brexit—fast. I’m not holding my breath.

 

George Magnus is right: Mrs. May may have caught the peak economic point of the post Brexit era, a constellation that seems to mirror our previous peak public assumption.

To figure out, let us review Bloomberg’s ‘Brexit Confidence Barometer‘:

 

The custom index, designed to show the impact of the separation process on the U.K., is made up of indicators for employmentinflationgrowth and uncertainty. The higher the number, the healthier the economy—and vice versa.

 

The Bloomberg Brexit Barometer decreased slightly despite oil and iron taking a hit in the markets. With positive U.K. PMI data released earlier in the week, Friday saw Prime Minister Theresa May strengthen her political hand in local elections ahead of June’s nationwide vote. The barometer eased to 28.1 today, still in the “cloudy” range.

Source: Bloomberg

 

More to come.

Jacques

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