The least dirty shirt
Britain’s economy expanded by 0.0% in the fourth quarter of 2019, much as analysts had forecast. Traditionally, a stagnating economy is not something to celebrate. However, even with zero growth in Q4, the UK economy still managed to grow 1.1% in calendar 2019, an achievement not matched by all of its peers. So the pound had quite a good day.
Like the least dirty shirt on the rack, Britain’s less than sparkling performance still outshone France and Italy in Q4 and did so despite considerable headwinds from Brexit uncertainty that were only postponed by December’s general election. Investors seemed to treat the situation as one of those could-have-been-worse outcomes that are a precursor of better things to come.
They were similarly phlegmatic about the monthly output data which accompanied the GDP numbers. Monthly increases of 0.3% and 0.1% for manufacturing and industrial production fell short of forecast but they, too, could have been worse – as indeed they have in recent months. Overall it was a win for the pound, which scraped ahead by an average of 0.1%, losing only to the NZ dollar this morning.
Central bankers abound
It is turning into a busy couple of days for central bankers. Britain’s Mark Carney, the EU’s Christine Lagarde and America’s Jay Powell were out there yesterday and this morning New Zealand’s Adrian Orr and his team had something to say. Mr Powell will be on the podium again today.
The line from Europe was that monetary policy is not a panacea. Mark Carney praised the Prime Minister for increasing infrastructure spending (notably the hundred-odd billion pounds that will be poured into the HS2 railway line). In Brussels, Christine Lagarde made the same point in a different way when she told the European Parliament that when it comes to growth “monetary policy cannot, and should not, be the only game in town… fiscal and structural polices also have to play their part”.
In Washington, Jay Powell was making his biannual statement to the House Financial Services Committee and inevitably addressed the coronarvirus. His view was that “it’s just too early to say” what the economic impact on the United States might be” and “we have to resist the temptation to speculate on this”. Neither Ms Lagarde nor Mr Powell did a power of good for their currency; both the euro and the dollar lost nearly half a cent to sterling.
More Orr, more Powell
Adrian Orr took his first shot overnight when he signed the Reserve Bank of New Zealand’s monetary policy statement. There was no surprise that the RBNZ kept its Official Cash Rate unchanged at 1% or considerable astonishment that it is likely to remain there for the rest of the year. The NZ dollar added a cent and a quarter.
Mr Orr will be out again tonight when he testifies to Parliament’s Finance and Expenditure Committee. Ahead of that, Jay Powell will make a second trip to the Hill, this time to tell his story to the Senate Banking Committee. Neither man is likely to add a great deal to what they last said.
Other central bankers speaking today and tonight are the ECB’s chief economist Philip Lane, the Philadelphia Fed’s Patrick Harker, the Bank of Canada’s Stephen Poloz and the Reserve Bank of Australia’s Philip Lowe. There are no economic data of any consequence on the agenda.