Sajid Javid succumbs to Johnson’s power grab
This week we saw an unexpected change in Downing Street, when the chancellor decided he would rather go through the hassle of moving house than put up with the Prime Minister and his aides trying to take control of the Treasury. Boris Johnson and his advisers have taken an unprecedented step of trying to have complete control of all government departments firmly in Number 10. The one small mercy for Mr Javid is at least he won’t have to go through conveyancing.
While direct control will no doubt be more efficient, as the hidden agendas and power struggles that characterise Westminster will be swept away, we are all aware that good governance requires challenge and oversight. With no one at the cabinet table likely to tell the boss he’s had a terrible idea, the more likely it is a bunch of terrible ideas are about to become policy. Given some of the policies that have made it out of even the most independently minded cabinets, maybe their insights won’t be missed that much.
US: Jobs report gives the economy a positive start to the year
The pace of hiring within the US kept up its run last month as employers added another 225,000 jobs to the economy – easily beating economic forecasts of 164,000 jobs. Notable job gains occurred in construction, transportation, warehousing and healthcare. Unemployment rates continued to remain low at 3.6 per cent. All this will be pleasing news for President Trump who has made a burgeoning economy a key point in his re-election campaign.
Speaking of election campaigns, the Democratic nominations shook off the technical debacle last week to move onto the second contest in New Hampshire. Results saw Bernie Sanders, Pete Buttigieg and Amy Klobuchar do well while the wheels fell off for early favourites Joe Biden and Elizabeth Warren. While Sanders has performed well in the early states, Iowa and New Hampshire are not very representative of the country and even less representative of Democratic voters. Biden will be hoping to come back in more diverse states like Nevada and South Carolina which are up next.
GERMANY: Coronavirus puts economic growth into quarantine
The tender green shoots of recovery for Germany are at significant risk of getting trampled on by the Coronavirus. Germany, a key economy for the Eurozone, flirted with recession last quarter and the final figures released this week showed a country in stagnation. But its reliance on exports to China make it vulnerable to the sudden stop in activity seen as part of the efforts to combat the virus. This could tip Germany’s, and possibly the Eurozone’s GDP growth negative for the quarter.
For Germany, industrial output was down 3.5 per cent for the month of December while new orders slowed by two per cent. Vehicles are Germany’s biggest export thus global supply chain disruptions alongside the disruption to China could have a strong material impact on GDP growth. For the wider eurozone, sharp drops in factory output for France, Italy and Germany helped drag down industrial production to 2.1 per cent.
EMERGING MARKETS: Cutting season continues
Mexico joined a list of emerging economies in easing monetary policy this year. The nation cut interest rates four times last year, each time by a quarter basis point and the central bank continued the trend at the latest meeting this week. Rates now stand at seven percent.
By cutting rates, Mexico hopes to boost a moribund economy which last year contracted for the first time in a decade. Uncertainty around the free trade agreement and manufacturing weakness were two of the key reasons why the economy struggled last year.
However, early indicators (pre-coronavirus) all tilt towards positive growth this year. Consumer confidence is improving, core inflation remains stable and vehicle production, which is Mexico’s key export, increased in January.
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