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Cambridge Weekly Update – 7th October 2019


7th October 2019



Stall speed economy fears spreading

Once again, politics took our breath away during this first week of October. Donald Trump appeared to live-stream ever more evidence for his own impeachment, while the UK’s Boris Johnson ricocheted in his Brexit language between “last and final offer”, “a genuine attempt to bridge the chasm” and “broad landing zone in which I believe a deal can begin to take shape”.

UK economy finally buckling – a little

For UK investors – and indeed the public generally – Brexit tops the list of concerns. That is to be expected of course, given the importance of our future relationship with our nearest and dearest trading partners. Unfortunately, it often seems like the only difference between what we know now and what we knew in June 2016 is that we are further along the knife-edge. We profess no special knowledge about the political whirring of Westminster or Brussels. To assess the likely impacts Brexit could have – and has already had – on the British economy, we first need to understand the state it is in.

PMIs: Rotation or weakness?

2019 has not been kind to global manufacturers. The global slowdown in economic activity has constrained demand and left them with extremely little room for profit – as shown in the recent low readings for Producer Price Inflation (PPI), which can be seen as a measure of company pricing power. This has contrasted with the fate of the services industry, which – while not zooming ahead – has registered decent enough data to not be a major source of concern for the global economy. But last week, it looked as though that trend might be changing.

Has monetary policy finally run out of ‘ammunition’?

Economists who take the view that there are structural problems with the world’s developed economies often refer to the issues as “Japanisation”. That’s because Japan has faced many of the same issues earlier than the rest of the world. The experimental policies pursued by their government and central bank have provided valuable evidence for the current global situation. Indeed, one of the reasons Ben Bernanke was made the US Federal Reserve’s Chairman at the time around the financial crisis was that he was a noted expert on the effectiveness of Japan’s monetary policy.

Read the full commentary here