Goodbye 2016 – and, in the minds of many, “good riddance”. There’s no denying that the UK’s Brexit vote, combined with “The Donald” winning the US election have made this year, for some, an annus horribilis.
The grim drumbeat of on-going terrorists atrocities and, at the other extreme, the passing of an unnervingly large number of much-loved cultural figures, means we can all agree 2016 has had its share of bad news.
“I am not going to offer the incoming president advice about how to conduct himself”. So said Federal Reserve boss Janet Yellen last week, as the US central bank raised interest rates for only the second time in a decade.
The rate increase, in and of itself, wasn’t surprising. For months, various members of the Fed’s policy-making board have been publicly stating that higher rates were in the works. Still, despite the “quarter point” hike from 0.5pc to 0.75pc being “baked into” asset prices ahead of Wednesday’s announcement, the market reaction has been quite volatile.
“In the absence of a major financial meltdown, oil will end 2016 north of $60 a barrel.” So stated this column at the turn of the year – a forecasting flourish possibly fuelled by one Christmas brandy too many.
Back then, in early January, having plunged all the way from $115 in mid-2014, Brent crude was trading at $37 a barrel. In February, oil fell again, going below $30. At that point, my $60 prediction looked silly.
Last week’s Autumn Statement has provoked an extended gloom-a-thon. Those hoping to reverse the UK’s Brexit referendum, inevitably, were out in force. Scandalized at not getting their own way, countless political and media bien pensants have been doing their utmost to talk down the British economy ever since the vote went against them five months ago.
The negativity that’s followed Chancellor Phillip Hammond’s first Commons set-piece is just their latest attempt to spread panic and cower the government ahead of crucial negotiations on our European Union exit.
Has there ever been so much uncertainty surrounding an Autumn Statement? Phillip Hammond, while a significant player within the Conservative party for some time, has become Chancellor despite having little public profile beyond the “Westminster bubble”.
The fiscal views of the UK’s bean-counter-in-chief, moreover, remain something of an enigma. No-one seems able to say definitively if Hammond will continue with the Tories’ “austerity programme” or, in a rhetorical reversal, “loosen the purse strings” instead.
“While we will always put America’s interests first, we will get on with all other nations that want to get on with us. We’ll have great relationships, we will seek common ground not hostility, partnership not conflict”.
So Donald Trump during the small hours of Wednesday morning, as part of his acceptance speech. These emollient words, and the praise he heaped on Hillary Clinton after months of campaign-trail bile, changed the mood on global markets.
So, the UK is still growing quite well, despite the country voting to leave the European Union back in June. Our economy expanded, we learnt last week, by 0.5pc between July and September compared to the quarter before. That amounts to a buoyant 2.3pc annual growth rate. So does that mean everything in the UK garden is now rosy? And were Brexiteer-economists like me right? The answers are a definite “no”, and “maybe”.
What is now clear, and accepted by all but the most ardent anti-Brexit campaigners, is that the slew of pre-referendum scare stories warning of a “sudden and considerable fall” in economic activity if we backed Leave just over four months ago were nonsense.
The media hype surrounding any US Presidential election campaign doesn’t, in general, encourage serious economic analysis. The astonishing psychodrama of this epic 2016 contest – which reached a new peak, perhaps, during last week’s final television debate – is drowning out almost any meaningful narrative regarding the state of the US economy.
The world is fixated, of course, on the brutal battle between Donald Trump and Hillary Clinton. This marathon race for the White House, between two incredibly divisive candidates, has cut fissures across the American electorate far deeper than those that have long existed. And there’s still over two weeks to go.
A tumultuous week for the pound. And there could be more to come. Sterling, at the time of writing, is below $1.24 – down from $1.29 last weekend. The markets are properly spooked.
This latest currency fall was sparked early last week, when Prime Minister Theresa May signaled her preference for “hard Brexit”. But then the pound plunged more. Friday’s “flash crash” – which saw sterling touch $1.18, before recovering – followed warnings from French President Hollande that Britain would “pay” for leaving the European Union. That apparently triggered a wave of automatic, computerized sell-offs.
International commerce is stalling. The growth in exports of goods and services is this year set to fall below the overall expansion of global GDP for the first time in 15 years. Myopic politicians, ignoring the lessons of history, are succumbing to the siren calls of protectionism. The world economy is becoming more insular.
The World Trade Organization, the most important trade body on earth, just slashed its 2016 forecast for the increase in total international commerce from 2.8pc to 1.7pc – well short of its 2.2pc estimate for the growth of the world economy as a whole.