The economic numbers out of the UK this week shocked many in the press. The numbers were positive. We are not surprised. We are also not surprised that the UK has not yet begun the formal process for BREXIT.
In our notes of July 16 we wrote that a vote by the UK to leave the EU would be neither an immediate, nor a long-term problem for their economy. In the lead-up to the vote on July 23, few in the media explained that it would take many months, perhaps years, before the UK could negotiate a withdrawal from the EU. As is often the case, the press missed important details. Invoking Article 50 of the Lisbon Treaty will start the clock running on the negotiations for an exit. UK negotiators will then have 2 years to come to an agreement on the terms for exit. The Brits have yet to invoke Article 50. Thus, life goes on in the UK just as before the vote.
On July 24th we wrote that the vote to exit would ultimately have a positive impact on the UK economy. So far, so good. This week the Brits announced that retail sales were up 1.4% in July, the strongest July since 2002. Further, jobless claims fell and credit conditions are positive. For a full read on the UK’s economic numbers click here for the latest from Bloomberg. Their economy is reasonably strong.
Also on July 24 we wrote that the weakness in the US stock market was an over-reaction, and a buying opportunity for long-term investors. Again, so far, so good. The S&P 500 is up over 7% since then. To us, the entire BREXIT story is yet another example of how the press can whip a story into a frenzy, eliminate important details, and thereby mislead readers. This situation reminds us of a quote by Mark Twain: “If I don’t read the newspaper, I’m uninformed. If I do read the newspaper, I’m misinformed.”