Take that!

 By Cathy Wilcox

Dance!

By Michael de Adder 

Right where I want them

 

By Garth German

Cage Match

By Rick McKee 

We demand surrender

 By Ricardo Galvão

The art of the deal

 By Nick Anderson

White flag

 By Michael de Adder

My deal is better than Obama's

 By Cathy Wilcox

Iran here are my demands

 By Mike Luckovich

Iranian strategy

 By Matt Davies

No, the world economy isn't booming ...

 ... even though the manufacturing PMIs are up.

In the chart above, the dotted blue line, representing the big-8 manufacturing PMI, has jumped since the start of the Gulf War, while the services component (dotted red line) has plunged.  At first sight, the jump in manufacturing appears reassuring, but it is misleading.  In commentaries for individual countries, not just the big 8, but others, S&P Global, who calculate these indices, mention that many correspondents have increased stocks (inventories) to try and mitigate the rise in prices they think likely to happen.  In turn, this has led to increased orders and production--remember that everybody's spending is someone else's income.  But when prices have risen, there will no longer be the incentive to build up inventories.  Sales will drop, until inventories are once again in sync with demand and production.  De-stocking will occur, reducing output, sales and employment.

In contrast, services can't be stored in inventories.  You can't 'keep' a haircut or a meal in a restaurant or a holiday or an air trip.  You can't have a stack of services like these in a box in a warehouse.  And because people are directly, right now, feeling the effects of surging oil prices and increased uncertainty, they have cut back.  And until confidence is restored, that will continue.  As the dotted red line shows, services are already in trouble.

But confidence will be very hard to restore.  The US has shown that it does not care about the stability of the world economy or the oil market, and there is no obvious off-ramp for Trump and his haplessly amateur administration.   The oil market is in chaos, and very shortly demand destruction, that is, the reduction in GDP and spending and production to bring oil demand and supply into balance, will begin.  In the short term, oil demand is extremely inelastic, i.e., it is unresponsive to price.  In the longer term, of course, things will happen to shift the relationship between oil demand and GDP, such as switching to EVs for example, or making jet engines and aeroplanes more efficient.   But until those changes take effect, the only way to bring oil demand into balance with oil supply is to contract demand.  The longer the war lasts, the worse the downturn will be.  This is clearest in air transport, where a physical shortage of fuel will constrain the number of flights.  But it applies to road transport as well.  Also, how do people who drive to work by car cut their petrol use?  They can't, so they'll spend less on everything else.  Demand will fall as prices rise.

Economies take time to stop, and time to re-accelerate.  The services PMIs show an immediate response, which will spread into the rest of the economy, soon.

Every previous oil crisis has been followed by recessions.  This one will be no different, unless the war ends now.  And that seems extremely unlikely.

Mission accomplished

 By Rick McKee

Another forever war

 By Michael de Adder

Clap on, clap off, the clapper!

 By Mike Luckovich

UK EVs now cheaper than petrol cars

 From The Guardian

The price of new battery electric cars has fallen below petrol cars in the UK for the first time, according to the car sales website Autotrader, in a significant milestone in Britain’s transition away from fossil fuels.

The average price of a new electric car listed on the website was £42,620, compared with £43,405 for a new petrol model – making the former £785 cheaper based on advertised prices after discounts.

The higher upfront cost of electric vehicles has long been one of the big sticking points preventing some drivers from switching away from cars with polluting petrol and diesel engines towards those with battery motors, which do not emit carbon dioxide directly. Total running costs for electric cars have been lower for some time.

UK battery electric car sales accounted for 22% of new car sales in the first three months of the year, according to the Society of Motor Manufacturers and Traders, a lobby group.

Prices in the UK have been pushed down by the electric car grant brought in last summer, offering up to £3,750 off some models. Carmakers have also been under intense pressure to drop prices to meet electric car targets, known as the zero emission vehicle (ZEV) mandate, and from an influx of Chinese competitors that have been able to undercut traditional brands.

Autotrader is the UK’s biggest automotive marketplace, although it does not cover all transactions across the country. The data suggests that the UK has reached a pivotal moment for decarbonising its road transport, as a cheaper upfront cost and significantly lower running costs combine to make electric cars increasingly attractive to buyers.

Bex Kennett, the head of new car at Autotrader, said: " ...carmakers had been forced into historically high levels of discounting earlier this year” as they tried to increase electric sales. However, their efforts appear to have been aided by the war in Iran, which has caused a rise in petrol and diesel prices. Car sales platforms across Europe have reported large increases in inquiries for electric cars from consumers keen to cut their energy costs.

Gurjeet Grewal, the chief executive of Octopus Electric Vehicles, the car division of the energy company, said the term milestone “gets thrown around a lot, but this really is one. For the first time, EVs are cheaper than petrol cars on upfront cost – removing one of the biggest barriers to switching.

“They’ve long been cheaper to run, and now they’re cheaper to buy, too. Add in growing competition and more choice, and it’s clear the direction of travel: electric is the obvious option for drivers.”

However, the transition to electric cars in the UK still faces some barriers. Households across the country who do not have driveways are reliant on the public charging network, which remains patchy in some areas.

Given the strategic risks revealed by the Iranian war, the government should regard the EV subsidies as money well spent. 

In Australia, the BYD ATTO 1, shown below, is comparable in size and performance to the petrol Suzuki Swift, and is roughly the same price (AUD $24,000, which includes a 10% sales tax), without subsidies.  An A$3,000 subsidy for EVs costing less than $30,000 would sharply accelerate EV sales in Australia, as it is in the UK.

The BYD ATTO 1, Australia's cheapest EV.

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They had no air force, they had no navy

 By Broelman

Iran talks continue

 By Bruce MacKinnon

Feeble US recovery due to Trump

This chart shows the average of the PMI and ISM indices for the US (before 2011, it's the ISM alone), broken up into the services and the manufacturing sectors, and the average of the two, shown by the blue line.  (The relationship between the "whole-economy" PMI/ISM index and GDP is shown in the bottom chart, from 2000 to 2026, but I haven't updated the GDP data to include the latest release.)

After previous slowdowns or recessions, the rebound from the low point has been strong.  This time round it has been feeble.  Note how at the beginning of 2025, a strengthening recovery was aborted by Trump's tariffs.  Then, just as the economy started to pick up again, Trump's Iran war has caused a renewed downturn.  Now, so far, it's only one month of slowdown.  But if the Iran war and the oil blockade continue, which seems all too likely, this downtrend will continue.

The 1973 and 1979 oil crises produced deep recessions and strong inflation surges.  It looks as if this will happen again.

click to enlarge

Click to enlarge

For some unknown reason

 By Benjamin Slyngstad

Talks with Iran are going so great

 By Christopher Downes