Just when you thought it was safe to go bowling, the Prime Minister has made it clear, all bets are off. The people of Manchester and elsewhere, cannot meet with with others, at home, in the pub or in restaurants. No skating, no trips to the casinos, no facials. The army is on standby to enforce law and order. The music will be turned off at illegal raves in Manc. The flashing lights are going out at Daisy Nook. We may not see them lit, in our lifetime again, or at least before Christmas.
Matt Hancock made it clear this morning, the real problem is not the result of people going to pubs or restaurants or illegal raves for that matter. The problem is that of families visiting each other's houses. Contact tracing has shown, the vast majority of infected people, have mainly been seeing friends and extended family, living nearby. Close, close relatives in extended kinship groupings, the obvious target.
The restrictions were announced, just three hours before the start of Eid al-Adha, the "Festival of the Sacrifice". The Prime Minister was accused of discriminating against Muslims. The Grinch who stole Eid, the claim. The pub ban additionally offensive. The government response "we also screwed up Easter and may cancel Christmas as well" suggests plans are in hand to mess up with Yom Kippur, in the name of impartiality.
The second wave is coming from Europe, "we must be prepared" the warning from Johnson. The latest slogan is "hands, face and space". Be alert for more government warnings. "Hands, Knees and Bumpsadaisy" a more catchy slogan. "We apologize for bumping into you, in the name of social distancing" a more simple SOCO, the single over-riding communications objective.
So what of strategy, the underlying challenge, "the return to normality"? This is confusing setback. The Prime Minister has slammed the brakes on the easing of lock down. The risk is, he may have also hit the brakes, on the speed of the recovery ... there will be more pressure to extend the furlough scheme until the end of the year ... over one million jobs are at risk ...
Unleash The Dogs Of War ...
Peace returned to Portland this week. The Fed troops withdrew, the protestors dispersed. The President's law and order play, polled badly. A rethink was required in the White House.
Trump is trailing by ten points in the polls. Biden is ahead in Arizona, Florida and Michigan. Key states for the President are at risk. The solution from the Rose Garden ... to postpone the election.
Tweeting on Thursday, Trump attacked the idea of Mail-In voting and suggested the election should be delayed ...
"2020 will be the most inaccurate and fraudulent election in history. It will be a great embarrassment to the USA. Delay the election until people can properly, securely and safely vote". (for me)
The idea of postponing was immediately slammed by Democrats and Republicans alike. Congress alone can determine the date of the election. Trump reverted to suggestions, he may not accept the result in November, should he lose anyway!
Mike Pompeo continued his assault on China, in the latest "Wag the Dog" strategy. The consulates have now closed in Houston and Chengdu. The pressure is increasing on Huawei, The President is threatening to ban TikTok. A sale to Microsoft may follow, to save those essential video clips, for young American.
China is the enemy of the nation, Beijing, a clear and present danger. The President blames China for Covid now but in January and February he had praised Xi's response to the pandemic. Pompeo attacks China's civil rights record in Xinjiang but John Bolton has written that on two separate occasions, Trump told Xi, he should go ahead with building the Uighur camps as the "right thing to do".
Pompeo may seek to wade in on Hong Kong, but in June last year, Trump spoke with President Xi by phone, and told him he would not condemn a crackdown in Hong Kong. Trump told the press, "Hong Kong is part of China, they will have to deal with that themselves, they don't need advice".
This month Pompeo was in London to solicit support for American foreign policy but which one? Trump announced troop withdrawals from Germany and threatened to pull troops out of South Korea and Japan unless the host nations paid up.
This month China issued a warning to the UK. Stay out of Hong Kong and the South China Sea. Trade deals will be at risk if Johnson becomes a mere "Puppet of Pompeo". One Aircraft floating in a far off sea, is not a return to the glory days of Palmerston and "Civis Brittanicus Sum" ...
DIY and Gardening Lead The Way ...
Retail Sales bounced back in June. DIY and Gardening were the best performing sectors, along with household electrical stores and dispensing chemists.
Overall retail sales were up by 1.7% excluding fuel. This compares to a fall of 19% and 10% in April and May. Food sales were up by over 5% in the quarter. Binge drinking in April eased. Alcohol sales, up by 40% in April, fell by over 4% in the latest month available.
Overall non food sales were down by 17%. Clothing and footwear sales were down by over 30%. Open and they will come the message to retail. The figures represent a dramatic improvement on the period of lock down. Internet developments continue to dominate. Online sales were 32% of all transactions in June and 32% for the quarter as a whole.
Food sales on line have doubled during lock down, accounting for 11% of total sales. Non food sales on line eased back slightly as stores reopened. 33%, that's one in three transactions, of non food sales, were secured online. Clothing sales lead the way. The impact on high street and shopping centres, an irreversible trend of shrinking retail footprints and slowing consumer footfall.
Output Gathers Momentum in July ...
"The UK economy started on a strong footing" according to Chris Williamson Chief Business Economist at IHS Markit "as business continued to reopen doors after the Covid lock down". July data indicated a marked improvement in business conditions. The latest survey data indicated a return to growth for the service sector and a much faster rise in manufacturing production than seen in prior months.
The manufacturing index increased to 53.6 in July from 50.1 in June. The service sector index, increased to 56.6 in the month, from 47.1 prior month. The overall composite index increased to 57.1 from 47.7 in June.
"The momentum was fueled by the release of pent up demand as clients and customers returned to spending. Businesses were able to open their operations as staff returned." according to Duncan Brock Group Director at CIPS.
The overall picture suggests a rapid bounce back as the economy reopens. The data supports the prospect of a V shaped recovery. Just as well. The economy appears to have contracted by 24% in the second quarter. We expect a steady improvement in the third quarter, with output still down by around 8% in the final three months of the year.
Three million jobs could be at risk unless the furlough scheme is extended to the end of the year. Government borrowing in the first three months of the financial year was £128 billion. The Office For Budget Responsibility expect borrowing for the full year to be over £300 billion for the financial year as a whole. Time yet to determine the shape and speed of the recovery. Time yet to determine, the shape and speed of the jobs recovery specifically ... before spending just a little bit more ...
The consulates are closing in Houston and Chengdu. China has ordered the closure on the US consulate in Sichuan province. A retaliation measure for the enforced closure of the US consulate in Houston Texas.
Federal agents entered the Chinese consulate on Friday. The US had given China 72 hours to "cease all operations and events". The Chinese foreign ministry call the move an "unprecedented escalation" amid ongoing tensions.
Mike Pompeo has been unleashed by the President as the China attack dog. This week Pompeo was in London to meet with the Prime Minister. Support for American foreign policy was on the agenda. Support for the campaign against Huawei and TikTok part of the commitment. The World Health Organisation and the administration in Beijing were part of a new axis of evil preparing weapons of mass infection, presumably.
This week, Pompeo, gave a provocative speech, calling on all Chinese citizens to work with Uncle Sam to change the direction of the ruling Chinese Communist Party. "Today China is increasingly authoritarian at home, and more aggressive in its hostility to freedom everywhere else".
Freedom everywhere did not appear to include Portland, Oregon. Federal agents acting under the direction of the White House used tear gas and rubber bullets to suppress demonstrators in the city. The Mayor of Portland was teargassed in the process. Demonstrations against racism and police brutality have morphed into demonstrations about the presence of federal agents in the city. Both the Mayor of Portland and the Governor of Oregon have said the agents are not welcome. Videos have emerged of protestors taken away by camouflaged troops in unmarked vehicles.
Trump has threatened to send a "surge" of federal troops to other "Democrat" led cities to "help" combat crime. This is election year. 100 days to the polling date. Trump is trailing Joe Biden by over ten points. The President needs an external enemy to close ranks within the GOP and an internal enemy to galvanise the right. China is easy to blame for the Covid crisis, as the case load hits four million in the USA.
The White House is challenging the authenticity of the postal ballot. The President is suggesting he may not accept the result in November, if Biden wins. Scenes from Washington and Portland were reminiscent of the Reichstag fire and Blackshirts on the streets of Berlin.
In Washington today, the President is now wearing a mask and the troops have better camouflage ...
The Prime Minister outlined plans to get Britain back to normal this week. The advice to work from home will be dropped next month. Employers will be offered greater discretion to determine, how and when, employees may return to the work place.
Civil servants will return to Whitehall. The use of public transport will be extended. Casinos and bowling alleys will reopen. Skating rinks will thrill, once again, to the sound of blades on ice.
Exhibitions halls will open. Business events will resume. Fans may be allowed to return to the sports stadiums in October, if all goes well. "Let's get Britain back to normal, in time for Christmas" the message from Boris Johnson. "Let's get business, back to normal, in time for Brexit" he should have added.
There is much to be done to avoid a significant setback this year. Latest ONS data suggests the economy fell by 24% in the second quarter. Construction output fell by 40%, manufacturing output fell by 25%. Retail, transport and storage sectors fell by over 30%. The leisure sector collapsed by 90%, to just 10% of prior output.
The latest jobs figures mask the underlying problem. The furlough scheme is providing much needed support to the jobs market. The u-rate held steady at 3.9%. The number of people officially unemployed ticked up slightly to 1.35 million.
Ominous signs abound. Underlying earnings growth slowed to 0.7%, bonus pay fell by 24%. The number of vacancies fell to 333,000 compared to 800,000 at the start of the year.The experimental ONS claimant count hit the 2.6 million level, compared to 1.4 million in March.
How back will it get? We now expect growth for the year as a whole to fall by just over 12%. Our detailed sector output model suggests a V shaped recovery, with output down by around 8% in the final quarter of the year.
The number of people unemployed by the end of the year will rise to over 2.5 million if the furlough scheme is ended in October. We would still expect a significant recovery by the Spring of next year if all goes well.
For a more detailed presentation, join us for The Saturday Economist Live on the 31st July or the Brabners Quarterly Economic Briefing on the 23rd July. We outline our forecasts by quarter and by sector.
China Avoids Recession ...
In China, GDP increased by 3.2% in the second quarter of the year, following a drop of 6.8% in the first quarter. The second largest economy in the world avoided a technical recession, defined as two consecutive quarters of negative growth.
Exports increased by 0.5%, imports increased by 2.7%. Manufacturing increased by over 4% in the quarter. Growth of 5% is expected in the second half of the year. China will be the first major economy to achieve positive economic growth as Europe, Japan and the US struggle to reopen their economies.
In the US, some states are pausing or reversing plans to reopen businesses. Nationally, 3.6 million Covid cases have now been reported. The fatality rate is set to hit 150,000 by the end of July. The daily death toll is rising. Texas, Arizona and South Carolina have seen death rates double. Significant spikes have been seen in California and Tennessee.
The White House is struggling to formulate an appropriate response. The President has been committing less of his time and energy to managing the pandemic. "He is not really working this anymore, he doesn't want to be distracted by it" the claim in the Washington Post this week-end.
In a latest poll, 64% do not trust what the President is saying about the pandemic. Just 33% approve of Trump's handling of the crisis. With just over 100 days to go to the election, Joe Biden is now 11 points ahead in the polls. Body bags and refrigerated trucks are heading to Florida. The swing state is faced with a real crisis as curfews are imposed in parts of the state.
The US economy will shrink by an estimated 6% this year. The unemployment rate is over 10%. 54% of voters say they approve of Trump's handling of the economy ... Joe Biden's personal rating is slipping ... the race is far from over yet ...
Rishi Sunak is now the most popular Chancellor of the Exchequer, since Gordon Brown, apparently. With over 9 million on the payroll and more supported by unemployment pay, the social media modelled Chancellor, is now tipped for the top job, if Boris Johnson slips up.
This week, the Chancellor announced his "Plan for Jobs in 2020". How the government will boost job creation in the UK and more importantly, stop the cash being splashed, on the extremely expensive furlough scheme.
The scheme is due to end in October. The Prime Minister has warned, it is a scheme which cannot go on forever. When it ends, the government fears a wave of redundancies, just before Christmas. Hence, the "Plan for Jobs". The plan includes a VAT cut for the hospitality sector, "eat out to help out" vouchers for families, a cut in stamp duty, a new job retention scheme, a grant for green home spending, plus bonuses for apprenticeships and youth work placement.
Together the schemes will cost a further £30 billion pounds, on top of the £120 billion of special measures already in place. Tucked away in the small print, the Treasury glossed over a further £33 billion of spending on the NHS, including £15 billion to be spent on PPE and £10 billion on "test and trace".
£30 billion here, £30 billion there, and soon you are spending real money. According to the IFS, government spending in the current financial year will be a staggering £350 billion. The deficit will push towards 20% of GDP before too long. But is the money all well spent?
The VAT cut is described as manna from heaven by the hospitality sector. At a cost of £4 billion, the cut may well be extended into Easter next year. The Stamp Duty cut is welcomed by the housing sector. Buyers will save an average £5,000 per transaction.
A boost to the green economy always welcome, a stimulus to apprenticeships and youth employment always a valiant effort. The voucher scheme, to boost the restaurant trade, comes at a time when most people are still uncomfortable about eating out. Jenny Harries, the Deputy Chief Medical Officer is uncomfortable when they do.
People should reduce the risk of dying, by slimming down and losing weight, the main medical message. The scheme is expected to cost about £500 million pounds. Chump change, crumbs from the Treasury table, in the grand scheme of things.
The main criticism is of the job retention scheme. Businesses who bring back workers from furlough will be paid a £1000 bonus per employee if they remain in work into next year. If all furloughed employees are brought back into work, this could cost the Treasury £9 billion.
Companies will receive the bonus, even if employees have already returned to work. Many will return to work with or without the scheme. For those set to lose their jobs, the bonus will be of little value. Economists call this a "dead weight scheme".
HMRC are unimpressed. Jim Harra, Chief Executive, in a written letter to the Chancellor, reports "I am unable to reach a view, this represents value for money, to the standards expected, by the "Managing Public Money" guidelines.
The scheme must have focus grouped well, especially among the Tory back benches. The money would have been better spent on extending the furlough scheme, to the end of the year, in sectors like hospitality which have been badly hit.
The Chancellor explained there is more to be announced in the Autumn Statement ... time enough to let the markets run and measure the return to work momentum in an economy badly damaged by shut down. Time then to ensure further spending plans represent value for money to the standards expected. The Chancellor's rating may have taken a hit on Instagram, the clock is Tik Toking on any leadership move ...
Joe Biden makes a move ...
Joe Biden emerged from the bunker this week. The candidate announced a $700 billion dollar plan to "build back better". The plan, to create jobs in the USA and invest in new technologies.
Battery technology, artificial intelligence, biotech and clean energy will feature. Digging for coal and lagging the roof will not.
Five million new jobs will be created by investing in domestic production and substitution of foreign supply chains. Corporation tax will increase to fund part of the spending plans. An increase in the minimum wage expected, an increase in union access will also form part of the plan.
"Trump has simply given up" says Biden, "American families are paying the price of White House incompetence."
Biden is ahead in the polls. Top voter concerns are Coronavirus, Racial Injustice and Foreign Policy. Hardly Trump strong points. Mike Pence is making the hard yards on campaigning at the moment. Speculation is rising Trump may quit the race.
In a piece in the Evening Standard this week, Jon Sopel North American Editor for the BBC writes ...
"It is striking, just how many well connected people have told me, that if the polls stay as bad as they are for Trump right now, then come Labour Day (September 7th), they wouldn’t be surprised if he quit the Presidential race."
Why would Trump quit? In the President’s limited lexicon, no word is more insulting than loser. The argument goes, that if he can’t win, he will find a way to extract himself from defeat. Supporters are becoming frustrated by his self defeating conduct. This week the President announced he has no interest in a phase two trade deal with China.
"I don't think about it now" Trump told reporters on Air Force One this week. "They could have stopped the plague, they could have stopped it, they didn't stop it."
Joe Biden is ahead in the polls. His campaign strategy is primarily, to do next to nothing and say next to nothing. His guidelines, part philosopher Boethius, “Stay silent and they will think you are wise” and part assassins code “There is no need to murder someone, who is committing suicide".
The Samaritans guidelines tell us, the majority of people who feel suicidal, do not actually want to die, they do not want to live the life they have. It may well be the President no longer wishes to live life in the White House. Hopes of a Nobel peace prize dashed, defeat in the polls in November best avoided, political suicide offers a plausible way out ...
That's all for this week! Have a great, safe, week-end, eat out, help out, work out, wear a mask, with a smile ...
"Eat Out to Help Out" the message from the Chancellor this weekend. The pubs are open, the restaurants ready for action. Britain needs to start spending again. If not, a generation of young people will become "out of work" victims, of the economic crisis. "We must learn what it is like to go out again. It is the nation's duty to get out there and spend, to save jobs at risk", says Rishi Sunak
The hospitality industry is worth £130 billion per annum. It generates almost £40 billion in tax revenues for the exchequer. It is the third largest private sector employer accounting for ten per cent of total employment and five percent of GDP.
The Treasury are anxious to get the economy back to work. In the first two months of the financial year, Tax Revenues fell by 20%, the VAT take fell by over 30%. Government borrowing was £110 million. The Debt Management Office will issue over £300 billion of new gilts in the first six months of the financial year, to fund the crisis.
The Prime Minister said he would drink a pint of beer. Jacob Rees-Mogg recommended a yard of ale to facilitate social distancing. Chris Whitty the chief medical officer warned of alcohol abuse, from extensive consumption by the yard.
"Pubs could become super-spreading environments, if social distancing measures are ignored", said Chris Whitty. Cricket will be allowed later this month. Good news for cricket lovers dashed. The Chief Medical Officer warned, of players hugging bowlers, when they take a wicket!
The opening will come too late for some. This week, Bella Italia, Cafe Rouge and Las Iguanas went into administration. Carluccio's and Frankie and Benny's have already made the trip.
The Prime Minister launched his "New Deal" with a commitment to build, build, build. More hospitals, more schools, more police. The largesse will be limited. Both the Prime Minister and the Chancellor warned this week, the furlough scheme cannot go on forever.
Hopefully it may not have to. Andy Haldane Chief Economist at the Bank of England suggested the economy would be rapid and V shaped. The latest data from the IHS Markit PMI surveys on manufacturing and services, suggested a recovery in June, from the output lows of April and May.
Don't get too excited. In the service sector, new orders are still falling but at a much lower rate ...
China Recovery on track ...
The latest data from the Caixin China Composite Index suggest the recovery continues in China. The service sector expanded at the fastest rate for over ten years in June.
In the service sector, business confidence increased to a three year high. Both activity and new orders increased. The headline index increased to 58.4 in June, compared to 55.0 in May. The upturn was attributed to the easing of virus related restrictions and stronger demand conditions both at home and in export markets.
The broader composite index increased to 55.7 from 54.5 in May, indicating a sharp and accelerating increase in overall activity. Businesses are highly confident about the economic outlook, the epidemic is under control, restrictions have been lifted and the economy is recovering at a faster rate.
In the USA, the jobs data for June provided some relief. Almost 5 million jobs returned, as bars, restaurants and other businesses reopened. The leisure and hospitality sector increased payrolls by 2.1 million. Other jobs were added in retail (740,000) and manufacturing (356.000). The unemployment rate fell from 13.3% to 11.1%. The country has recovered about a fifth of the 22 million jobs lost to the shut down.The Congressional Budget Office suggests the unemployment rate is likely to remain in double figures through until the end of the year. The economy is expected to shrink by 5.9%.
Covid cases are rising rapidly in Arizona, Florida and Texas. The daily case load is increasing nationally. Almost 350,000 cases were recorded last week. 2.7 million cases have now been registered overall. The death toll has risen to 128,000.
The President was in sombre mood this week. Just four months to go to the election. The President is behind in the polls. In a "dark" speech at Mount Rushmore President Trump focused on the "left wing cultural revolution" that aims to rewrite U.S. history and wipe out U.S. heritage. Trump is in a battle against a new far-left fascism.
"Angry mobs are trying to tear down our statues, deface our most sacred memorials and unleash a wave of violent crime in our cities." "Four more years", the crowd chanted, four more months the hope for many ...
That's all for this week! Have a great, safe, week-end, eat out, help out ...
Brits will be allowed to travel to more than 15 countries this Summer. The government is set to agree a significant easing of travel restrictions, in and out of the U.K.
Large parts of Europe will be open to holidaymakers, without the need for a two week quarantine period, on arrival or return. France, Greece, Spain, Italy and Germany will be on the itinerary. Portugal is omitted, following a return to lock-down in Lisbon.
The news will be welcomed by the travel industry. Airlines and airports will receive a welcome boost to activity following the slump suffered under the Covid crisis. Matt Hancock issued a warning to all, this week. Drawing a line in the sand, visits to beaches will be banned, unless social distancing measures are maintained. Ice cream cones must be kept two meters apart, unless they are licked within a "two household size" bubble.
Liverpool FC also received a warning this week. The club could lose the Premier League title, if parties in the street continue. Snatch squads will be sent in, to retrieve the cup and return it to The Etihad, if street celebrations continue. Merseyside police issued a Section 34 Dispersal Order, following large gatherings in the area. More powers were granted as the Liver Building became the target of fireworks and flames. Social distancing guidelines were ignored as the crowd sang "You'll never walk alone, within a two meter zone".
The conflict between the people and the police has been drawn into stark contrast this week. The scenes on the Pierhead in Liverpool, the illegal raves in Manchester and the street clashes in Brixton, are a warning to government, there is little appetite for further lock-down measures. The focus has to be on getting Britain back in business and soon.
The Prime Minister has made it clear, there will be no period of austerity as activity returns. The focus will be very much on investment in transport, infrastructure and telecommunications with a green kicker. It will be a "decade of investment" and not a "decade of austerity". Infrastructure spending, will be brought forward, with an acceleration of the planning approval process. "No austerity for workers, those who paid the brunt of the pain, will not be made to pay".
Rishi Sunak, squashed hopes of an early cut to VAT or other taxes. The focus was very much of getting consumer spending back on track, without further fiscal stimulus for the moment. The Treasury will wait to assess the shape of recovery before any additional steps are taken.
The Chancellor will unveil his stimulus package in July. At the centre of the package will be a big skills agenda and a focus on the "green jobs" revolution. The Bank of England has made it clear, it is ready to step in, as the buyer of last resort, to fund the deficit spending.
So what will be the shape of the recovery? Jerome Powell at the Fed, suggested it will be a slow V , the IMF suggested this week it will be a "Whoosh". There is no doubt the recovery will be a V, it always is, or has been since serious records began in 1948. The government is taking all the right steps for recovery. If things go well, who knows, it may even be a "V with a Whoosh" ...
Man In The Shadows ... The Return from Tulsa
The President returned from Tulsa this week. The wild evening promised in Oklahoma didn't quite go as planned. Trump boasted over one million had signed up for the event. In the end, just 6,200 turned up for the trope.
The President droned on for over ninety minutes. The incoherent rant, included a ten minute plus explanation, of why he had trouble with the ramp at West Point, "It was slippery and he had leather shoes on."
Trump also explained why he had a problem, drinking water with one hand, during his speech. He had done a lot of saluting that day, his arm was tired and he didn't want to get his tie wet. Some people just do not appreciate the sacrifices, a commander in chief, has to make!
Brad Pascale, Trump's campaign manager had boasted of over one million tickets requested. It was the biggest data haul in campaign history. Mobile phone numbers were collected as part of the recruitment campaign. In the end, the additional staging for the crowd over flow was dismantled. The no shows on the day, were huge.
Trump had been trolled by the Grandma of TikTok. A lot or people who signed up, were kids using false names. Mary Jo Laup had published a video on the platform, urging people to book but not show up as a protest. The video went viral. The result was a huge success for protest and a disaster for the Trump campaign.The grandma of TikTok now works for Joe Biden.
Trump is now trailing by fourteen points in the polls. With just four months to go to the election, the campaign is in trouble. 2.4 million cases have now been identified as a result of the epidemic. The case load is rising, Trump is urging a slow down in testing as the big solution.
In Texas and Florida, the restrictions are being re imposed. Disney is postponing the opening, Apple is closing stores. New York is closing the borders to states with rising infections. Europe is closing the borders to visitors from the New World.
John Bolton's book arrived this week. It is a tough read. The President of China, had said he would like to work with Trump into the second term. Trump replied that people were saying, the two term constitutional limit should be repealed for him. Four more years may not be enough for the President. The first four years may well be enough for voters in the U.S.A., especially those on TikTok ...
That's all for this week! Have a great, safe, week-end, wash your hands, don't talk to strangers and stay in your bubbles!
The Covid-19 threat level was reduced from four to three this week. The virus remains "in circulation" but a "gradual relaxation of restrictions" will be enabled.
Pubs and restaurants will be allowed to open in July. Gyms and health clubs will follow suit. The two metre social distancing rule will be relaxed. The travel industry will benefit from quarantine free, "Air Bridges" with Spain, Portugal and Greece.
No hanging about at the bar in the pub; no cutlery on the table in the restaurant. A round of drinks will be purchased on a phone app. Food menus will be disposable, orders taken by waiters and waitresses "encouraged to wash their hands" each time they serve a different table.
The government is washing it's hand of lock down. The cost to the Treasury is just too great. 9,000 new cases were reported in the last seven days. Just over 1,000 deaths were revealed, as a result of the epidemic.
There have been 42,000 deaths in total, from 300,000 cases, a fatality rate of 14%. At peak the death toll was 8,000 in a week. The peak is well passed but the virus does remain in circulation. The next move down to level two, may just take a little more time.
This week, the ONS released the latest government borrowing figures. Borrowing in May was £55 billion. In the first two months of the year, the total was almost £105 billion. Total debt at almost £2 trillion exceeded the value of GDP for the first time since 1963.
Total revenues were down by 20%. VAT revenues have fallen by 34%. The costs of the furlough scheme and other Covid measures, increased expenditure by 50%. For the year as a whole, borrowing is now expected to rise by over £300 billion, pushing the total debt level to over £2.3 trillion. The DMO will issue almost £500 billion of debt this year, to fund additional borrowing and roll over existing debt.
The Bank of England stands ready as the buyer of last resort. This week the MPC announced an additional £100 billion of UK government bond purchases, taking the total to £745 billion. The Dire Sraits Policy of "Money for Nothing, Gilts for Free" continues. The Old Lady of Threadneedle Street, no longer wears a QE face mask. "Just buying the gilts directly, from the Debt Management Office", the reality, as we have long explained.
Ten year gilt yields closed up four basis points at 0.27. Sterling closed down $1.2353 in the week from $1.2561 at start. Against the Euro, the Pound closed lower, testing the 1.10 level.
Lots of other news this week on inflation, jobs, vacancies and earnings. Retail sales fell by 14% in May compared to 22% in April. Clothing and footwear sales were down by 60%, DIY sales were up by 5%. Online sales increased by 20% accounting for 33% of all retail transactions.
The jobs market remains in stasis at the moment as the furlough scheme underwrites the employment position. Vacancies fell to 476,000 in May, from over 800,000 at the start of the year. An ominous reminder of what could happen to unemployment levels. An urgent reminder of the need to get the economy moving again ...
Bolton Puts The Boot In ...
Former National Security Adviser, John Bolton put the boot into Trump this week. Extracts from his long awaited memoirs on life in the White House were released to the press. The White House is campaigning to ban the book entirely.
The President is not fit for office. Putin played him like a fiddle. Trump pleaded with President Xi to help his re-election prospects by buying more Soy beans.
The President was unaware the UK had nuclear weapons, asked if Finland was part of Russia and generally had no guiding principle, other than "what's good for the re-election campaign.
The Trump administration is considering charges against Bolton for releasing classified information. The President claims the book is a "compilation of lies and made up stories".
Trump said this week, "Bolton's book, is a compilation of lies and made up stories, all intended to make me look bad. Many (but not all?) of the ridiculous statements he attributes to me, were never made, pure fiction."
The Department of Justice claims, the book contains material, that could "reasonably be expected to cause damage, serious damage of exceptionally grave damage to the United States".
Mike Pompeo, rallied to the President's defence, calling Bolton a "traitor" adding "to our friends around the world: You know that President Trump's America is a force for good in the world".
Good to know that in view of the threat to resume Nuclear Testing, abandon the World Health Organisation and withdraw troops from NATO. The offer to negotiate between India and China reveals a sense of purpose and direction the world requires from President Trump's America.
Tomorrow the Trump campaign is back on the road in Tulsa. Despite warnings from health officials, the masks are off and the rally returns. Over 150,000 cases were reported in the US last week and over 5,000 deaths recorded. The President is promising a "Wild Evening". In America, the case load is rising, the rally may well accelerate the process ...
Output in the UK economy fell by 20% in April compared to prior month. Compared to prior year, total output fell by 24.5%. One quarter of output was lost to lock-down, as the Covid crisis hit.
Almost nine million jobs would have been at risk, without the government furlough scheme. Manufacturing output fell by almost 30%. Construction output fell by 44%. The leisure sector, including accommodation and food fell by 92%.
Within the service sector, retail business fell by 34%. Transport and Storage by 39%. Professional services fell by almost 20%. Arts and entertainment dropped by almost 50%. Education and healthcare did not escape the epidemic. The only sector to remain unscathed was public sector administration and defense spending, rising by a modest 1.4%.
In our monthly ZOOM webinar updates we have been warning of a shock to output in the second quarter of around 21%. The April fall is expected to be the nadir of the setback and shutdown. In May, construction activity increased in the month, manufacturing businesses were encouraged to return to work.
Next week, all retail businesses will be allowed to open. Boris Johnson is encouraging households to get out and shop. The Prime Minister is planning to visit a high street this week. He hopes to reassure shoppers it is safe to leave their homes and splash the cash. Yes get out and spend, the R(0) is less than one.
Fast food stores are reopening, vegan sausage rolls will once again be available from Greggs. The shock to output is likely to mitigate in the months ahead. Output in Q2 may well be down by 22% but our sector model suggests the drop in Q3 and will be around 12.5% and in the final quarter of the year, down by 6%.
For the year as a whole, we expect the economy to fall by 10% with a similar bounce back in 2021. Without an extension of the job protection scheme to the end of the year, the number of people out of work will rise to over 3 million, a rate of almost 10%. It seems likely the Treasury will shell out for the remainder of the year but not just yet. For now, the priority is to get Britain back to work. Some may not make it, as the job data next week will suggest.
It is time to quarantine the scientific advisers and clampdown on statements from the dissidents within the group. Who would have thought it would be possible to produce R(0) values to two decimal places on a regional and daily basis? It isn't of course. The data presents the highlight of spurious accuracy, a process in which numerical data is presented in a manner which implies a higher level of precision than is actually the case.
We have always claimed, applying mediaeval measures of containment to a contemporary economy, will drive us all back to the dark ages. The travel quarantine scheme will have to be ditched. Social distancing rules will be brought into line with the international guidelines. People have been scared out of the wits and into their homes. They must be persuaded to return to the light. The all clear sirens are sounding, most people cannot hear it yet ...
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Fed Forecasts Slow Recovery ...
Jerome Powell, Chairman of the Federal Reserve, released the latest forecasts for the U.S. economy this week. GDP is expected to drop by 6.5% this year. The unemployment rate is expected to be 9.5% by the end of the year.
The recovery will be slow but V shaped. The economy will bounce back in 2021 by 5%. Job gains will mitigate the unemployment rate to 6.5%. The recovery will continue into 2022 with further growth of 3.5% and a "u" rate of around 5.5%.
The recovery may not be enough to save the Trump administration. Joe Biden is leading the polls by 14 points. The President's approval rating is down at 38%. Clinton and Bush were in similar territory. A one term tag, awaits. Trump is desperate to return to the rallies and campaign trail. Florida will be the home of the next Republican convention. The viral risk was to great for North Carolina.
Anthony Fauci has warned of the dangers of political rallies as the epidemic continues to move across the USA. The President talks of the epidemic in the past tense, an "invisible enemy" conquered. Two million cases have now been reported in America with over 110,000 deaths reported.
The Trump campaign team are taking no chances. Delegates must sign an indemnity. "By attending the rally, you and any guests assume all risks related to exposure to Covid-19 and agree not to hold Donald J Trump for President Inc. liable for illness or injury". Voters will have to wait just until November, to hold the President to account.
News this week, Melania Trump delayed a move to Washington to avoid a disruption of son Barron's schooling. The delay also presented an opportunity to renegotiate a better prenup agreement."Taking care of Barron, The First Lady is taking no chances ..
Have a great, safe, week-end, wash your hands, don't talk to strangers and stay alert! Don't forget to join me for the monthly round up on line. The Saturday Economist now on ZOOM ... on the 26th June. Including our special features "White House WTF " "Market Wrap" and "Surveys Special" ...
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