The strike in two McDonald outlets in the UK is interesting. The main reason is the lack of security associated with zero hour contracts and the low level of compensation.
It’s not a huge movement yet and McDonald headquarter said it is just 0.01% of their workforce in the UK who are on strike.
My guess is that this movement could rapidly grow in a near future. Continue reading
In a recent post I was worried by the potential weakness of UK domestic demand after the fall of the real disposable income for three quarters in a row and by the downturn of the saving rate (see here). I also said in this post that consumer credit was growing too quickly. This post is a complement.
We can go further by looking at all the households’ financial liabilities.
The graph below shows the ratio of the households’ total liabilities to the disposable income. This ratio is now higher than the level that triggered the 2008 financial crisis.
When we go into details we see two divergent trajectories for the debt and the disposable income. These profiles are a source of constraints for households. Debt is growing too fast and a rebound in disposable income is necessary to avoid a further weakness first on consumption and after on real estate.
The comparison of industrial activity in the European economy is very instructive when we consider the period after the British referendum on Brexit.
Despite the acceleration of world trade, British industrial production is lagging behind the various countries of the Eurozone. This is shown in the graph below.
The profile of industrial activity in Italy flies across all the major European countries, while the United Kingdom is clearly lagging behind, especially since the beginning of 2017. The gap is significant with the index of the euro zone as well as with France, Germany and Spain. Continue reading
Negotiations on Brexit may lead to a negative and persistent shock in the United Kingdom as it will deeply change rules for the external trade. Therefore there is a need to carefully look at the domestic demand momentum in order to eventually counterbalance this negative and persistent shock.
At the same time, the Bank of England has mentioned (Carney in Sintra or Saunders here) that the monetary policy could be normalized. In other words, the BoE is wondering if there is still a need for stimulus. Here too it is interesting to carefully look at the domestic demand to see if the need for stimulus is superfluous or not. Continue reading
In the wake of the UK elections, the ensuing confusion suggests an increasing likelihood of a soft Brexit, as Theresa May does not have a majority and will have to deal with the situation as it stands. However, it cannot, and will not, be quite that simple as this would mean going back on the result of the Brexit referendum.
One source of confusion derives from the fact that British citizens’ image of Europe has changed considerably in the space of a year, and according to a survey by PEW Research Center in Spring 2017, a majority of the population in the UK has a positive view of Europe i.e. 54%, or 10 points higher than this time last year at the time of the referendum.
The idea of a soft Brexit has emerged as a result of Theresa May’s losses at the recent general election. Continue reading