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Urgent Stock Market Message

UK Economy Post BrExit Boom, Bank of England, Treasury Economists, Journalists ALL WRONG!

Economics / UK Economy Sep 05, 2016 - 06:51 PM GMT

By: Nadeem_Walayat


Two months on from the BrExit economic collapse apocalypse prophecies a stream of economic data on the UK economy continues to paint a picture that is a the exact extreme opposite to that which the establishment and their vested interests painted both before and immediately after the EU referendum vote, one of recession or even economic collapse that many still blindly cling onto to this very day despite reality stating that the UK economy is literally soaring into the stratosphere by recording unprecedented gains across several measures for the month of August.

The ball started rolling a week ago following the release of the Purchasing Managers Index that had earlier during July fallen sharply to 48.3 (a reading below 50 implies economic contraction) which vested interest academic economists that populate the mainstream press concluded heralded the start of severe imminent economic downtrend, a recession early warning.

Here's what the FT reported early August : Post-referendum UK manufacturing PMI deteriorates

The UK manufacturing purchasing managers’ index (PMI) fell to 48.2 in July, down from an initial reading of 49.1. That’s the worst pace of contraction since early 2013. Levels above 50 indicate expansion.

Last week, Markit said the initial reading showed “a dramatic deterioration in the economy” in the wake of the Brexit vote.

However, the PMI release for for August instead of continuing to collapse into a BrExit void and thus feeding the establishment elites vested interest economists propaganda message instead did the EXACT OPPOSITE by soaring by 5 index point to a reading of 53.3 the largest rise in the indexes 25 history that sent sterling soaring and economists scrambling to cover their backs as real world economic data made a mockery of that which they pass as economic analysis regurgitated across the mainstream press. With the latest data release C-PMI showing that the services sector literally boomed during August with the index rising from 47.4 in July to 52.9, far beyond the 50 that academics had penciled in barely hours before today's data release, the largest rise in the indexes history which again prompted sterling to rocket higher to a post Brexit high.

Similarly recent employment data (+21.8%), wages (+4.7%) and retail sales (+1.4% for July alone) have confounded the REMAINERS economic doom prophecies. So instead of recession Britain is experiencing a 'FREEDOM dividend' of which the Olympics medals success was just a taste of what to expect as I wrote at the time -

22 Aug 2016 - BrExit Win's Britain Olympics Success Freedom Dividend, Economy Next

At the end of the day sports is sports, and thus is just a taste of the freedom boost to come that will most significantly be felt in the economy, as all of the economic doom merchants in the pay of the establishment elite that populate the mainstream media will once more be found out to be badly wrong, as the British people and economy fired up by BrExit freedom of having taken back control will out do all of the establishments fear mongering as painted by the academics and political pundits and thus expect the UK economy to get a brexit boost rather than collapse, both from consumers going on a confidence inspired spending spree and from the export sector boosted by sterling's 12% devaluation, which has already been reflected by the stock markets strong performance when the fools that populate the financial press had penciled in a crash, collapse or worse!

Another sign that consumer confidence has risen instead of collapsed are new car registrations that are up 3.3% on a year ago, which is a strong sign of confidence as cars tend to be the the second most expensive item to purchase after ones home. Whilst house prices instead of crashing by as much as 20% as many REMAIN doom merchants were warning of in the run up to the June 23rd vote, are instead accelerating higher as illustrated by the latest figures out of the Nationwide that show that house prices are now rising at their strongest rate for 2016, up 0.6% for August. Whilst the Halifax August figure remains pending.

“Almost everyone now agrees, from the Governor of the Bank of England to the IMF, the OECD to the Treasury, 9 in 10 economists to, yes, even some Leave campaigners, there would be an economic shock if we left Europe. Let’s be clear what that means. The pound falling, prices rising, house prices collapsing, mortgage rates increasing, businesses going bust, and unemployment going up. In other words, a recession.”
- David Cameron

“If we leave the European Union there will be an immediate economic shock that will hit financial markets... That affects the value of people’s homes and the Treasury analysis shows that there would be a hit to the value of people’s homes by at least 10 per cent and up to 18 per cent." - George Osborne

“Brexit represents the biggest domestic risk to financial stability” - Mark Carney

The bottom line is that the Prime Minister, Chancellor, Bank of England, Treasury and academic economists dire economic reports have all amounted to being nothing more than pure economic propaganda which is food for thought going forward as you read that which purports to be economic analysis from the likes of the Financial Times downwards, instead expect the EXACT OPPOSITE of what the propose to transpire!

In terms of the longer-term economic picture then see the conclusion of my comprehensive analysis of early July:

BrExit Implications for UK Economy, Interest Rates, Bonds, Markets, Debt & Deficit, Inflation...

The Economic Cost of BrExit

So in terms of the costs of Brexit to the UK economy and taking account of the forecast range of 2% to 4% GDP over the next couple of years, then post Brexit my conclusion is that the hit is probably going to be nearer to 2% then 4%, so the UK is approximately going to take a 2.6% GDP hit. Whilst my forecast of February 2016 had factored in a hit of between 1.6% and 2.1%.

However, the outcome for 2016 will likely turn out to be bang on my forecast of 1.6% GDP. Therefore the real hit of Brexit will be felt in 2017 where instead of my forecast growth of 1% to 1.6%, the UK economy could flat line at probably around 0.5% growth! And that is how I expect the 2.6% cost of Brexit to manifest itself.

So as I have repeatedly warned, FREEDOM does carry a price and that price now looks set to be approx 2.6% of GDP which is set against my pre-brexit expectations for a 1.6% to 2.1% cost. So whilst it will be painful, however it won't be as bad as ANY of the recessions of the past 40 years! AND DON'T FORGET that the economic IMPACT of BREXIT will be GREATER on the EU than on the UK!

And the latest economic data confirms my conclusion that the real cost of BrExit won't make itself manifest in 2016 but rather in 2017 and even then it won't result in a recession that the clueless and vested interests still cling onto to this day because the UK remains on course to dodge a Brexit recession.

For more on the prospects for post Brexit britain see my following two in depth pieces of analysis that are likely to increasingly become manifest.

And watch the following video of what actually happened on BrExit night that caught virtually ALL by surprise as illustrated by my selection of the highlights from 8 hours of BBC coverage of the EU Referendum result.

Also see the second video on trading markets during brexit night that illustrates how all hell broke lose once the polls closed Thursday 23rd June, triggering a sharp rally in sterling and FTSE futures that was sustained until the actual results started to be announced shortly after midnight triggering a 5 hour market panic.

And ensure you are subscribed to my always free newsletter for more in-depth analysis that attempts to map out what is likely to happen next to Britain and Europe.

By Nadeem Walayat

Copyright © 2005-2016 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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