Bad news, good news
This week began (belatedly for us Britons) with bad news and seems to be ending with some good news. I’ll concentrate first on some overseas influences before looking at the UK.
North Korea has fired missiles across Japan before but Tuesday morning’s test across North Japan marked another step up in potential danger; the floods in the US and in the eastern area of the Indian subcontinent are more immediately damaging.
The floods will cause pain for many and for a prolonged period. James covers more detail about the US hurricane below. Any disaster (such as the floods) has impacts on an economy which are difficult to gauge. Assets are destroyed and work is difficult for a period. Then there’s a bounce back (which amounts to a drawdown in savings) as the rebuilding takes place, with the initial phase often pushing activity up sharply. It’s the second phase of rebuilding that matters. If the people don’t have enough personal savings or they don’t get enough help, the affected area and the people therein suffer for a long period as their capital assets are much less productive.
In the US, this may be the event that galvanises support for Trump to spend on infrastructure as promised last year. Certainly, his administration is trying to tie it to the passing of the raising of the debt ceiling. The calculus is that members of congress will not want to be seen voting for more misery in Texas.
Trump’s fortunes may be turning markedly in other areas.
The discipline instilled in his administration is may be progressing the tax proposals. There have been comments from his camp playing down the extent of reform, while Trump has been relatively quiet (in his own terms), and the floods will require funding, it seems that the administration is getting bipartisan backing for a program of tax cuts aimed at the “middle classes”. Steve Mnuchin has pushed back the date of the packages release but we think this is a sign of a better working relationship with congress.
