UK GDP shows us heading for stagflation

This morning and these days it is early in the morning since the switch to the 7 am announcement, brought a minor dose of bad news for the UK.

Monthly real gross domestic product (GDP) growth slowed in July 2021, growing by 0.1% compared with 1.0% growth in June 2021. This is the sixth consecutive month of GDP growth, as coronavirus (COVID-19) restrictions continued to ease to varying degrees in EnglandScotland and Wales.

Part of the reason I say minor is that with our stagflation theme we were concerned about a slow down and we had already seen the fall in Retail Sales. In addition there was the NHS app pingdemic from back then.

However it was another bad month for the expectations of the Markit PMI as shown by fxstreet.


The UK services sector activity expanded more than expected in July, the final report from IHS Markit confirmed this Monday.

The seasonally adjusted IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) was revised up to 59.6 in July versus 57.8 expected and a 57.8 – last month’s flash reading.

So quite a surging rate of growth and the overall one for the economy was 59.2 so strong growth. It would appear those who forecast 0.6% growth for the UK economy this morning were asleep on its previous misfires and followed it.

Breaking it down

Let us start with the apparently rampaging services sector.

Monthly services output remained flat at 0.0% between June 2021 and July 2021

As you can see that is quite a fail for the PMI and as it is around 80% of the UK economy we are well on our way to explaining the July result. Perhaps it looks at these areas.

Information and communication was the main contributor to services, mainly because of a 2.8% growth in computer programming, consultancy and related activities. Financial services also contributed positively to services, mainly because of a 2.1% growth in financial service activities (not including insurance and pensions).

But not so much at these.

Professional, scientific and technical activities fell by 2.3% in July 2021 and was the largest negative contributor to growth in services. Five of its eight sub-industries contracted in July 2021, with output in advertising and market research falling by 7.3% after an exceptionally strong June 2021, and a fall of 7.3% in legal activities.

I guess you have already figured out the reason for the fall in legal services.


The drop in legal activities and real estate activities on a fee or contract basis (which fell by 10.4%) reflects the partial end to the Stamp Duty holiday period in England and Northern Ireland from 1 July 2021.

Also there was the fall in Retail Sales plus I note there is quite a bit going on in this sector.

Output in consumer-facing services fell by 0.3% in July 2021, its first fall since January 2021 when it fell by 8.3%. Most of this fall is because of a 2.5% fall in retail trade (mainly because of a fall in food and fuel sales), partially offset by a 72.5% growth in travel agency, tour operator and other related reservation services (growing from historically low levels), and a 15.1% growth in sports activities, amusement and recreation activities.

As you can see there have been some wild swings which actually bring the total into question. When you have sub-sectors moving by 15% let alone 72.5% then a total which only moves by 0.1% has to be not only within the margin of error but well within it That theme continues if we look at the other side of the coin.

Arts, entertainment and recreation activities saw strong growth in July 2021 of 9.0%.


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By contrast this put in a strong performance both in relative and absolute terms.

Production output increased by 1.2% in July 2021, with mixed growth across the four sectors. This follows a fall in production of 0.7% in June 2021.

We can now look at another story of two halves with the good bit being the end of a maintenance period in the North Sea.

Mining and quarrying contributed most to production’s increase, as it grew by 21.9% in July 2021. This strong growth mainly reflects the reopening of an oil field production site, which was previously temporarily closed for planned maintenance.

However it is still well below last year.

Despite this growth, output in the extraction of crude petroleum and natural gas remains low by historical standards, with July 2021 output 19.1% below its July 2020 level.

I thought I would take more of perspective and here is spglobal looking at the data up until May.

UK crude production has been recovering since 2014, but remains below half of levels at the turn of the millennium.

If the record gas prices continue then North Sea Gas is going to look a lot more attractive. Obviously if it is in the UK sector but also if it is in friendly Norway. I realise this is not official policy but at some point governments will be forced to come down from their present fantasies.


This was quiet which in some respects is a result after fears about the car industry.

The manufacturing sector remained broadly flat in July 2021, after five consecutive months of growth, with anecdotal evidence from businesses responding to the Monthly Business Survey suggesting staff shortages (including COVID-19 self-isolation requirements) as a challenge to production.

So the NHS pingdemic was in play here and probably elsewhere. Also you may be surprised to see the strongest sector which is from a low base.

The largest positive contribution to manufacturing growth came from the manufacture of motor vehicles, trailers and semi-trailers, which grew by 11.4% as reports of microchip shortages disrupting car production eased in July 2021.

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Members of Congress and Their Aides are Exempt From Biden’s Vax Mandate

Members of Congress and their aides are exempt from Joe Biden’s vaccine mandate for federal workers.

Since Joe Biden’s executive order applies to federal workers in the executive branch, members of congress and staffers in the legislative branch are exempt.

Newsweek reported:

President Joe Biden’s new vaccine mandates for federal employees don’t apply to members of Congress or those who work for Congress or the federal court system.

Biden issued two executive orders on Thursday requiring vaccination against COVID for federal workers and contractors who work for the federal government. He also asked the Department of Labor to issue an emergency order requiring businesses with more than 100 employees to ensure their workers are vaccinated or tested on a weekly basis.

However, Biden’s order on federal workers applies to employees of the executive branch. The House of Representatives and the Senate belong to the separate legislative branch, and the courts to the judicial branch of the federal government.

USPS workers are also getting special treatment.

USPS workers are part of the federal vaccine mandate under OSHA jurisdiction, though technically not under the executive order.


Taliban to America: Recognize Us as a Legitimate Government

Zabihullah Mujahid, a spokesman for the Taliban, requested the United States formally recognize the terrorist organization as the government of Afghanistan on Tuesday, less than 24 hours after the last American serviceman departed the country.

The Taliban has been engaged in a 20-year war against America prompted by the jihadist attacks against the U.S. on September 11, 2001. While Washington had organized a plan to end the occupation and withdraw from Afghanistan by May 1, 2021, as part of a negotiated agreement with the Taliban, President Joe Biden chose not to honor the deal, extending the war for another four months.

During those months, the Taliban swept through most of the country’s provinces, taking them over with minimal resistance, before arriving in Kabul and deposing the U.S.-backed government on August 15. Taliban leaders asserted that Biden’s refusal to abide by the agreement meant that they were no longer beholden to its provisions requiring the jihadists not to attack U.S. forces or ally with international terrorist organizations.

Biden had first changed the May 1 deadline to September 11, but later readjusted it to August 31. The last American forces reportedly departed Afghanistan on late Monday local time, leaving behind hundreds of Americans, according to the Pentagon.

Mujahid, the Taliban spokesman, independently confirmed the U.S. departure before Taliban jihadists organized celebrations at Kabul’s international airport. In remarks to reporters on Tuesday, Mujahid said the jihadist organization would now seek friendly relations with the United States as it would with the rest of the world, given that the Afghan War had allegedly ended.

“We want all countries in the world, including the United States, to recognize us,” Mujahid said, according to the Afghan news network Tolo News. “We are part of the world. We assure you that the soil of Afghanistan will not be used against any country or anyone.”


Members of the Taliban Badri 313 military unit take a position at the airport in Kabul on August 31, 2021, after the US has pulled all its troops out of the country to end a brutal 20-year war — one that started and ended with the hardline Islamist in power. (Wakil Kohsar/AFP via Getty Images)

“Our message to the world is peaceful and the world should reconsider us,” Mujahid reportedly asserted.

Elsewhere in remarks Tuesday, Mujahid repeated the near-incessant calls by the Taliban for foreign investment to help the terrorist organization remain in power on a long-term basis. Mujahid admitted that the Taliban, and Afghanistan generally, faced “economic challenges,” according to Tolo, that would require significant increases in trade with the rest of the world.


“Foreign aid should not lead to another occupation in Afghanistan,” the spokesman warned.

The U.S. government was among the first to freeze Afghan government assets following former President Ashraf Ghani’s flight from Kabul on August 15, blocking Taliban terrorists from accessing those funds – estimated at about $9 billion in reserves. Both the International Monetary Fund (IMF) and the World Bank froze Afghanistan’s aid accounts shortly thereafter.

Despite this, the Biden administration has hinted that it may, at some point, recognize the Taliban. Secretary of State Antony Blinken said in the immediate aftermath of the Taliban’s takeover that Biden could work with the Taliban if it “upholds the basic rights of its people and that doesn’t harbor terrorists.”

Another Taliban spokesman, Suhail Shaheen, denounced the frozen assets shortly after the Taliban takeover as “an injustice” and urged the international community to subsidize a Taliban regime in the country.

“We need the reconstruction of Afghanistan, the people of Afghanistan need the budget. The [central bank] shall need the budget,” Shaheen told the Chinese government news network CGTN.

Bank account holders gather outside a closed bank building in Kabul on August 28, 2021, following the Taliban's stunning military takeover of Afghanistan. - Since the Taliban seized power 14 days ago government buildings, banks, schools and universities have remained largely closed. (Photo by Aamir QURESHI / AFP) (Photo by AAMIR QURESHI/AFP via Getty Images)

Bank account holders gather outside a closed bank building in Kabul on August 28, 2021, following the Taliban’s military takeover of Afghanistan. (Aamir Qureshi/AFP via Getty Images)

Shaheen implored China to invest in the Taliban once again in an interview published by the South China Morning Post on Tuesday.

“China, our great neighboring country, can have a constructive and positive role in the reconstruction of Afghanistan and also in the economic development and prosperity of the people of Afghanistan. It is expected [that] China [will] play its role,” the newspaper quoted the spokesman as saying.

The Chinese Communist Party has not formally recognized the Taliban as the government of Afghanistan, but has indicated that it is open to doing so. In the immediate aftermath of the fall of Kabul, Chinese Foreign Ministry spokesman Hua Chunying stated that Beijing would “respect the will and choice of the Afghan people,” apparently implying that the Taliban’s violent siege was a manifestation of democracy (the Taliban has insisted, “there will be no democracy at all”).

The Chinese government, through its social media arms, has indicated that Chinese state-owned companies are interested in investing in a Taliban-run Afghanistan. It has also warned the Biden administration not to sanction the Taliban in response to its decades-long history of human rights atrocities and urged the United States to invest financially in the Taliban’s success.

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We All Saw It Coming. CNBC Homepage Today. Fauci: “Vaccinate The Children”

they are slowly pushing and pushing and testing your resistance
now they are comfortable with your lack of reactions to go after the most sacred : your children too.

Speaking to a U.K. audience at a lecture hosted by the London School of Hygiene and Tropical Medicine earlier this week, the U.S.′ top infectious disease expert discussed the significance of “long Covid,” the benefits of a move to a three-dose vaccination drive and why he believes it is important to vaccinate children.
Fauci said that while it was his opinion children should be vaccinated against Covid-19, he did not wish to cast any “dispersion” on decisions taken by U.K. authorities to date.
The U.K.’s official vaccine advisers have not recommended the shot for healthy 12 to 15-year-olds.

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Hunter Biden Now Under Federal Investigation

Joe Biden’s son Hunter Biden is about to come under more scrutiny than he ever has before.


That is because Republican members of the House Oversight and Reform Committee have started investigating “possible undue White House influence” involved with the coming sale of some of Hunter’s artwork, CBS News reported.


Kentucky Rep. James Comer penned a letter to Georges Bergès, the gallerist who is handling the sales of Biden’s paintings, requesting that he give the committee documents pertaining to his communications with Hunter and the White House by September 21.

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Stocks In A Bloodbath, Look For A Sellable Rally

On Monday, stocks took a beating from rising trade tensions as China put the brakes on imports of agricultural products following Trumps latest tariff threat. As noted by the WSJ:

“So much for a trade deal any time soon.

Monday’s pain for U.S. investors was foretold late Sunday evening. The Chinese yuan sank below 7 per dollar and hit an all-time low in offshore trading Monday with local officials blaming the depreciation on President Trump’s decision last week to extend tariffs to almost all Chinese imports. Mr. Trump responded on Twitter, accusing China of engaging in currency manipulation.

The result was a mess across global markets. The Dow Jones Industrial Average fell 766 points while the S&P 500 and Nasdaq Composite fell about 3% and 3.5%, respectively.”

Before we get into the charts, let me just remind you what we have been saying about Trump’s “trade war” for more than year now:

May 24, 2018:


China has a long history of repeatedly reneging on promises it has made to past administrations.

By agreeing to a reduction of the “deficit” in exchange for “no tariffs,” China removed the most important threat to their economy as it will take 18-24 months before the current Administration realizes the problem.”

June 19, 2018:

“The U.S.- China confrontation will be a war of attrition: while China has shown a willingness to make a deal on shrinking its trade surplus with the U.S., it has made clear it won’t bow to demands to abandon its industrial policy aimed at dominating the technology of the future.”

May 7th, 2019

  1. China is playing a very long game. Short-term economic pain can be met with ever-increasing levels of government stimulus. The U.S. has no such mechanism currently, but explains why both Trump and Vice-President Pence have been suggesting the Fed restarts QE and cuts rates by 1%.
  2. The pressure is on the Trump Administration to conclude a “deal,” not on China. Trump needs a deal done before the 2020 election cycle AND he needs the markets and economy to be strong. If the markets and economy weaken because of tariffs, which are a tax on domestic consumers and corporate profits, as they did in 2018, the risk off electoral losses rise. China knows this and are willing to “wait it out” to get a better deal.
  3. China is not going to jeopardize its 50 to 100-year economic growth plan on a current President who will be out of office within the next 5-years at most. It is unlikely as the next President will take the same hard-line approach on China that President Trump has, so agreeing to something that won’t be supported in the future is doubtful.”

June 29th, 2018

“China has been attacking the “rust-belt” states, which are crucial to Trump’s 2020 re-election, states with specifically targeted tariffs. (Now accelerated with the decision to stop imports altogether.)

While Trump is operating from a view that was a ghost-written, former best-seller, in the U.S. popular press, XI is operating from a centuries-old blueprint for victory in battle.”

There were many more articles in between, but you get the idea.

This has always been a war Trump can’t win. China’s ability to take a tremendous amount of short-term pain for a long-term gain will be more than President Trump counted on when he thought “trade wars are easy to win.” They aren’t, and the economic pain will likely be more than he bargained for.

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The markets are beginning to sense this as well, particularly as the White House escalates the situation by labeling China a “currency manipulator.” 


In the short-term, traders are now turning their focus back to the Federal Reserve for help. More rate cuts, however, are not likely going to be enough to solve the pressure to corporate profits, which will accelerate as the trade war escalates. 

Technical Update

Over the past couple of week’s, we have been talking about a potential correction. While the media was quick to jump on Trump’s “China threats” as the reason for the selloff, those actions were just the “catalyst that lit the fuse.”

As I this past weekend:

“[Over the last two weeks] the market is rallying in anticipation of more Central Bank easing. The markets are momentarily detached from weaker earnings growth, weaker economic growth, and a variety of other market-related risks. 

In the very short-term, the market is grossly extended and in need of some correction action to return the market to a more normal state. As shown below, while the market is on a near-term “buy signal” (lower panel) the overbought condition, and near 9% extension above the 200-dma, suggests a pullback is in order.”

Chart Updated Through Monday

, Technically Speaking: Stocks In A Bloodbath, Look For A Sellable Rally

We had also warned previously the current extension of the market, combined with overbought conditions, was due for a reversal.

, Technically Speaking: Stocks In A Bloodbath, Look For A Sellable Rally

On a very short-term basis the market has reversed the previously overbought condition to oversold. This could very well provide a short-term “sellable bounce” in the market back to the 50-dma. As shown in the chart below, any rally should be used to reduce portfolio risk in the short-term as the test of the 200-dma is highly probable.

(We are not ruling out the possibility the market could decline directly to the 200-dma. However, the spike in volatility and surge in negative sentiment suggests a bounce is likely first.)

, Technically Speaking: Stocks In A Bloodbath, Look For A Sellable Rally

As I noted in this past weekend’s newsletter, we have been taking actions within our portfolios to prepare for this correction and sharing those actions with our RIAPRO subscribers (30-Day Free Trial).

July 22nd Portfolio Update: This morning action was taken and we took profits on 10% of 11 of our equity holdings. All of these positions had gains in excess of 20% since January 1st.

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Taliban revels in US ‘defeat,’ says withdrawal a ‘big lesson for other invaders’

Now in control of quiet Kabul airport, insurgent group’s leaders symbolically walk on the runway, say they want ‘good relations with the US and the world’

A Taliban fighter sits in the cockpit of an Afghan Air Force aircraft at the airport in Kabul on August 31, 2021 (Wakil KOHSAR / AFP)
Members of the Taliban Badri 313 military unit stands guard next to a Afghan Air Force aircraft at the airport in Kabul on August 31, 2021. (WAKIL KOHSAR / AFP)
Afghan Air Force’s A-29 attack aircrafts are pictured as armoured vests are lying on the ground inside a hangar at the airport in Kabul on August 31, 2021. (WAKIL KOHSAR / AFP)
A Taliban fighter takes a picture of a damaged Afghan Air Force’s MD 530 helicopter with his mobile phone near the hangar at the airport in Kabul on August 31, 2021 (WAKIL KOHSAR / AFP)
A Afghan Air Force A-29 attack aircraft is pictured inside a hangar at the airport in Kabul on August 31, 2021 (WAKIL KOHSAR / AFP)
Taliban officials are interviewed by journalists inside the Hamid Karzai International Airport after the US withdrawal in Kabul, Afghanistan, Tuesday, Aug. 31, 2021. (AP Photo/Kathy Gannon)

KABUL, Afghanistan — The Taliban held full control of Kabul’s international airport Tuesday after the last US plane left its runway, marking the end of America’s longest war and leaving behind a now-quiet airfield and Afghans outside it still hoping to flee the insurgents’ rule.

Vehicles raced back and forth along the Hamid Karzai International Airport’s sole runway on the northern military side of the airfield. Before dawn broke, heavily armed Taliban fighters walked through hangars on the military side, passing some of the seven CH-46 helicopters the US State Department used in its evacuations before rendering them unflyable.

Taliban leaders later symbolically walked across the runway, marking their victory.

“Congratulations to Afghanistan… this victory belongs to us all,” Taliban spokesman Zabihullah Mujahid told reporters from the runway of the airport.

The defeat of America was a “big lesson for other invaders and for our future generation,” Mujahid said a number of hours after the last foreign troops departed Afghanistan.

He said “it is also a lesson for the world,” but added that the Taliban wants “to have good relations with the US and the world. We welcome good diplomatic relations with them all.”

The airport had seen chaotic scenes since the Taliban blitzed across Afghanistan and took Kabul on August 15. Thousands of Afghans besieged the airport, some falling to their death after desperately hanging onto the side of an American C-17 military cargo jet. Last week, an Islamic State suicide attack at an airport gate killed at least 169 Afghans and 13 US service members.

But on Tuesday, after a night that saw Taliban fighters fire triumphantly into the air, guards now blearily on duty kept out the curious and those still somehow hoping to catch a flight out.

“After 20 years we have defeated the Americans,” said Mohammad Islam, a Taliban guard at the airport from Logar province cradling a Kalashnikov rifle. “They have left and now our country is free.”

He added: “It’s clear what we want. We want Sharia (Islamic law), peace and stability.”

Mohammad Naeem, a spokesman for the Taliban’s political office in Qatar, similarly praised the takeover in an online video early Tuesday.

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