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Clouds gather as autumn political risks loom

The latest retail figures imply the economy is stalling even if it is not in full blown retreat and some observers are warning of political risks to come this autumn.
First up at the end of August is the third round of negotiations over the UK exit from the European Union. These Brexit talks are critical because a soon after on 19 October the EU’s chief negotiator Michael Barnier is due to report back to EU leaders on whether sufficient progress has been made to begin discussions on trade.
Choppy waters
In the intervening period prime minister Theresa May will have to negotiate a Conservative Party conference. From 1 to 4 October in Manchester the competing factions in her party are likely to stoke tensions over Europe. She is likely to come under pressure over the Conservative’s worse than expected performance in the June general election.
The German federal elections on 24 September have long been seen as the point at which discussions over the UK and EU’s future relationship can begin in earnest.
This is because the identity of the leadership of the continent’s main power broker and largest economy is critical to the destiny of Brexit. Chancellor Angela Merkel is widely expected to be rewarded for Germany’s strong economic performance with a bolstered mandate.
What are the experts saying?
Irish bank Davy’s chief economist Conall Mac Coille says: ‘UK retail sales data released on 17 August showed a similar picture to recent indicators — weak GDP growth but not an outright recession. However, political event risks for the UK are increasing amidst growing fears of a “cliff edge” Brexit in March 2019.’
The research team at ETF provider PowerShares point out the economy is being held up by a dramatic drop in household savings with the savings ratio (proportion of personal savings to disposable income) falling to a record low of 1.7% in the first quarter of 2017.
‘In conclusion, we think there remains scope for Brexit chaos over the coming years, both political and economic; we doubt that sterling has yet bottomed,’ they warn.
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