Another week and another defeat for U.K. Prime Minister Theresa May’s Brexit deal.
Meanwhile, the U.S. and China seem to be making further progress on their talks to resolve their ongoing trade dispute. And with concerns over slower economic growth ahead, it will be interesting to see the government’s data points for February’s retail sales report.
Brexit: The third time wasn’t the charm for May’s proposed agreement on how to exit the European Union. There’s already an extension to April 12 of the March deadline, but the defeat now means either another lengthy extension from the EU provided its members agree or what has been described as a “no-deal” exit. Having a deal in place would have helped the U.K. ease into the transition of not being an EU member. It would have provided the U.K. with temporary protections to EU tariffs and trade ties. The European Commission seems poised toward the “no-deal” exit, particularly since it tweeted on Friday that the no-deal possibility is now the “likely scenario.” The tweet also noted that benefits from a withdrawal agreement, “including transition period, will not be replicated in ‘no-deal’ scenario. Sectoral mini-deals are not an option.” Not having a deal in place also has been described as a “hard exit,” referring to frictions to trade–think the current stockpiling of goods and medicines in case of shortages due to trade disagreements–with former partners and other inconveniences, such as customs checks and border issues.
Trade War: U.S. Treasury Secretary Steven Mnuchin on Friday tweeted that he and U.S. Trade Representative Robert Lighthizer “concluded constructive trade talks in Beijing.” Next week, the U.S. welcomes China’s Vice Premier Liu He for another round of discussions in Washington. While intellectual property and enforcement have always been, and continue to remain, the key challenges to actually getting a deal signed, it wasn’t clear how far apart the two countries might still be on some issues. Currently the planned U.S. tariffs on $250 billion of imports from China are on hold to give the two some breathing room as they continue discussions to resolve their months-long bilateral dispute. Some financial executives in fashion and retail, such as factors, now believe that there will be some resolution to the dispute even if they don’t know when that will occur.
Government Reports: The Monthly Retail Trade report for February is expected to be released on Monday. Data collection and reporting has been delayed due to the partial federal government shutdown from Dec. 22, 2018 through Jan. 25, 2019. Given the Federal Reserve’s hold on raising interest rates and the decline in The Conference Board’s Consumer Confidence Index for March, out this past Tuesday, there’s been growing concern that the U.S. economy is slowing down and possibly tipping toward a recession. While the retail sales data for February could shed some light on the direction of the economy, it might not be until the March report becomes available that some conclusion could be drawn. By then, the reporting data should have normalized from the shutdown delays. Those delays have also meant tax refunds coming in later than expected, which might have impacted consumer perceptions and confidence levels.