Can Labour fix Britain using modern supply-side economics? Get insights into the UK retail sales data and the impact on the economy. US stocks end higher after strong retail sales data. Oil prices set for weekly gains on renewed enthusiasm around the US economy.
Sources:
https://www.theguardian.com/business/article/2024/aug/16/can-labour-fix-britain-modern-supply-side-economics
https://www.rttnews.com/3469485/european-economic-news-preview-uk-retail-sales-data-due.aspx
https://finance.yahoo.com/video/us-stocks-end-higher-strong-223824111.html
https://finance.yahoo.com/news/oil-prices-set-weekly-gains-005621415.html
Outline:
(00:00:00) Introduction
(00:00:39) ‘A big ask’: can Labour fix Britain using modern supply-side economics?
(00:03:16) European Economic News Preview: UK Retail Sales Data Due
(00:05:54) US stocks end higher after strong retail sales data
(00:08:46) Oil prices set for weekly gains on renewed enthusiasm around US economy
Simply Economics
Labour’s Modern Supply-Side Economics, UK Retail Sales Data, US Stocks Soar, and Oil Prices Rise
Can Labour fix Britain using modern supply-side economics? Get insights into the UK retail sales data and the impact on the economy. US stocks end higher after strong retail sales data. Oil prices set for weekly gains on renewed enthusiasm around the US economy.Sources:https://www.theguardian.com/business/article/2024/aug/16/can-labour-fix-britain-modern-supply-side-economicshttps://www.rttnews.com/3469485/european-economic-news-preview-uk-retail-sales-data-due.aspxhttps://finance.yahoo.com/video/us-stocks-end-higher-strong-223824111.htmlhttps://finance.yahoo.com/news/oil-prices-set-weekly-gains-005621415.htmlOutline:(00:00:00) Introduction(00:00:39) ‘A big ask’: can Labour fix Britain using modern supply-side economics?(00:03:16) European Economic News Preview: UK Retail Sales Data Due(00:05:54) US stocks end higher after strong retail sales data(00:08:46) Oil prices set for weekly gains on renewed enthusiasm around US economy
- Duration:
- 12m
- Broadcast on:
- 16 Aug 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Friday, August 16th. On today's show can labor fixed Britain using modern supply side economics. Plus we have a preview of the European Economic News with UK retail sales data due. And US stocks end higher after strong retail sales data. Let's coverage and more up next. I'm David and you're listening to Simply Economics. We start off with a look at how Britain's new Chancellor of the Exchequer, Rachel Reeves, plans to tackle the country's underperforming economy. Despite some recent progress, challenges like low business investment and declining productivity remain. To address these issues, Reeves is turning to a theory gaining traction on both sides of the Atlantic, modern supply side economics. For more on this, we're joined by our economics correspondent. So what exactly is modern supply side economics and how does it differ from past supply side policies? Modern supply side economics, as championed by US Treasury Secretary Janet Yellen, involves using the power of the state to drive an investment boom while also addressing inequality. The goal is to expand and upskill the workforce and encourage businesses to adopt the latest technologies to boost productivity. This contrasts with the supply side policies of the 1980s under Margaret Thatcher and Ronald Reagan, which focused more on free market solutions and deregulation to stimulate economic growth. It sounds like there are some similarities to the economic theories embraced by past labor governments. How does modern supply side economics compare to those ideas? There are indeed some parallels. In the 1990s, labor's economic plans were influenced by post-neoclassical endogenous growth theory, which emphasized the role of investment in driving stronger economic growth rather than relying on external factors. Non-supply side economics shares this focus on state activism through targeted tax and spending policies. However, the current approach also incorporates elements typically associated with conservative economic thinking like boosting the supply of goods and services. Given the UK's recent economic challenges, including the fallout from Brexit and the impact of global crises, how well positioned is Reeves to implement these policies. Reeves faces a tough road ahead, but there are some positive signs. The UK recorded the strongest growth in the G7 in the first half of 2024, suggesting that some progress was being made before labor's election victory. However, falling business investment and declining productivity remain major concerns. Implementing modern supply side policies will require significant political will and resources, as well as buy-in from the business community. Others will need to balance the need for long-term investments with the pressure to deliver short-term results. It will certainly be interesting to see how Reeves and the labor government navigate these challenges in the coming months and years. Thank you for your insights on this important economic story. Now, let's shift our focus to some key economic data releases from Europe today. Retail sales from the UK and foreign trade numbers from the Euro area are on the docket. Here with more details is our economics correspondent. What are you watching for in the UK Retail Sales Report? The UK retail sales data for July will provide important clues on the health of the British consumer. Economists are forecasting a rebound, with sales expected to grow 0.5% month-on-month. This would reverse the 1.2% decline we saw in June. Strong retail sales would signal that consumer spending is holding up, despite high inflation and rising interest rates. However, if sales disappoint, it could fuel concerns about a slowdown in the UK economy. And what about the Euro-area trade balance? That's also on the calendar for today. Right, Eurostat will publish the trade data for June a bit later this morning. The consensus forecast is for the trade surplus to narrow to €13.3 billion down from €13.9 billion in May. Awakening global demand has been weighing on European exports in recent months. Meanwhile, the high cost of imported energy continues to inflate the import bill. A further deterioration in the trade balance could act as a drag on economic growth in the third quarter. Elsewhere in Europe, Switzerland is reporting industrial production for the second quarter. What's the outlook there? Swiss industrial output has been contracting on a year-over-year basis since the start of 2022, reflecting the challenging global manufacturing environment. Economists expect another decline of around 2.9 percent in the second quarter, similar to the 3.1 percent drop in Q1. Sluggish demand and supply chain disruptions have been the main headwinds for Swiss industry. Finally, the Czech Republic is also releasing data this morning, July producer prices in that case. What's expected? The Czech Statistical Office will publish those figures shortly. The annual rate of producer price inflation is forecast to tick up slightly to 1.1 percent in July from 1.0 percent the previous month. While still elevated, factory gate inflation has moderated significantly from the double-digit rate seen for much of last year. This is a welcome development and should help ease pressure on consumer prices going forward. Thanks for that roundup from London. Turning our attention to the US, stocks closed higher on Thursday after strong retail sales data signaled resilient consumer spending easing fears of a potential recession. The Dow added 1.4 percent, the S&P 500 climbed 1.6 percent, and the NASDAQ soared more than 2.3 percent. Retail sales increased 1 percent in July, the biggest jump in a year and a half. For more on what's driving the markets, let's bring in our economics correspondent. What do you make of this surprisingly strong retail sales report? The robust retail sales numbers suggest that despite high inflation and rising interest rates, American consumers are still spending quite strongly. This is a positive sign for the health of the economy as consumer spending accounts for over two-thirds of US economic activity. The 1 percent month-over-month increase in July retail sales was double what economists had forecast. It was driven by strong sales at auto dealerships, e-commerce sites, and restaurants. This indicates that even as prices have risen, households are still willing to make big-ticket purchases and spend on discretionary items. At the same time, we also saw an unexpected drop in jobless claims last week. How does the labor market picture factor into the economic outlook? The weekly jobless claims report showed that the number of Americans filing for unemployment benefits fell by 11,000 to 239,000 last week. This suggests the labor market remains quite tight, even with some high-profile layoff announcements recently in certain sectors. As long as job growth remains solid and unemployment low, that should help support consumer incomes and spending. However, the tight labor market also risks keeping inflation elevated as rising wages feed into price pressures. So the Federal Reserve will be closely monitoring the job's situation as it weighs how much further to raise interest rates. Walmart, seen as a bellwether for the retail sector, reported strong quarterly results and raised its outlook. What does this tell us about the state of the American consumer? Walmart's results and guidance upgrade are quite encouraging. The retail giant said its customers are still spending on essentials as well as some discretionary items, despite the inflationary pressures. Walmart has been able to gain market share by keeping prices relatively low compared to competitors. Its performance bodes well for overall consumer resilience, especially among low and middle income households who make up the core of Walmart's customer base. However, Walmart did note that back-to-school spending came later this year, and it sees signs that some households are trading down to cheaper brands, indicating they are feeling the squeeze from inflation. Thanks for the analysis on retail sales and consumer spending. It's good to see some positive economic indicators, even as the Fed continues to battle high inflation. On a related note, oil prices are set to end the week higher, despite edging lower on Friday, as recent U.S. economic data boosted optimism over demand from the world's top oil consumer. Brent crude futures have risen about 1.3% this week, while U.S., West Texas Intermediate Crude Futures have increased about 1.2%. For more on this, let's bring in our correspondent. What's driving this optimism in the oil market, despite the slight dip on Friday? The main driver has been the surprisingly strong U.S. economic data released on Thursday. Retail sales beat analysts' expectations, indicating robust consumer spending, which is a key driver of oil demand. Additionally, jobless claims fell last week, further boosting confidence in the U.S. economy's resilience. This positive sentiment overshadowed the minor price decline seen on Friday. Aside from the U.S. economic data, are there any other factors influencing oil prices at the moment? Geopolitical tensions are also back in focus. Analysts at consultancy FGE warned of potential retaliatory attacks from Iran against Israel over the killing of a Hamas leader in Tehran. This could disrupt oil supplies from the Middle East if the situation escalates. On the other hand, ongoing negotiations to secure a ceasefire in the Gaza war could help ease these tensions. What about demand from other major oil consumers such as China? How is that impacting the market? Chinese oil demand has been a concern for the market. Chinese refineries sharply lowered their crude processing rates last month due to tepid fuel demand. The organization of the petroleum exporting country's OPEC also recently lowered its demand outlook for this year, citing softer expectations for China. Analysts at ANZ'd research noted that while gasoline and distillate demand remain strong in the U.S., apparent oil demand in China fell 8 percent year on year in July. Given these mixed signals from the U.S. and China, what can we expect for oil prices in the near future? The near-term outlook for oil prices will likely depend on the balance between the positive U.S. economic data and the ongoing concerns over Chinese demand. If the U.S. economy continues to show strength, it could provide support for oil prices. However, if Chinese demand remains subdued and geopolitical tensions ease, prices may face some downward pressure. Traders will be closely monitoring these factors in the coming weeks to gauge the direction of the market. Thank you for that insight. It seems the oil market is navigating a complex mix of economic and geopolitical factors at the moment. We'll continue to keep a close eye on developments in the U.S., China, and the Middle East to see how they shape oil prices in the weeks ahead. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [music] You