The latest monthly GDP estimate was released this week. Activity fell by 9% in November compared to prior year. Construction activity was down by 1.4%. Manufacturing down 4%. The service sector fell by 20%. The arts and entertainment sector was down by almost 40%. Accommodation and food were down by 65%.
For the year as a whole, we expect output in the economy to have fallen by around 10% in 2020. In the current year, despite the lock down in the first quarter, growth of 4.5% seems possible for the year as a whole. This is based on the assumption there is some easing of restrictions prior to Easter and the vaccination program continues at pace.
Our detailed sector forecasts outline the fortunes of some twenty sub sectors in the UK economy. Later this month we will release our "planogram" of sector winners and losers with a "Stocks Behind The Box" list of shares to pick, stick or flick.
Our "Tale of two economies" continued this week. Tesco reported a record Christmas. Shoppers were "treating themselves", as favourite pubs bars and restaurants were locked down. Food outlets benefited from the two nation state. Pink Prosecco and festive treats boosted sales at Lidl. Total sales were up by 18% compared to prior year.
ASOS raised profits guidance, reporting a sales increase of 36% compared to prior year. Online fashion retailer Boohoo released news of a 40% increase in sales in the four months to December.
At Primark, sales fell by 30% in the 16 weeks to the end of the year. The company warned of a potential £1 billion loss of sales, if the lock down continues to the end of February. Primark continues to resist the move to online shopping.
The fortunes of Very, Joules and Next continue to reflect the benefits of multi channel marketing. Moonpig is heading for a £1 billion IPO, as Paperchase and The Card Factor struggle with restructuring and administration.
Halfords reported sales up by 10% in a "best ever Christmas" boosted by a strong performance in online cycling sales. Digital sales boosted the performance at Dunelm. Online sales were up by 20%, with overall sales up by 20% in the quarter.
It isn't all great news. Lock down restrictions and a slump in travel have led to sales a drop in sales of 50% at Whitbread. Britain's largest hotel chain, the owner of Premier Inn and Beefeater, announced job 1,500 job losses. Occupancy rates are down by over 50%
The Chancellor of the Exchequer has warned it will get worse before it gets better. Job losses and business failures are set to increase.
The Governor of the Bank of England has suggested we are approaching the "darkest' hour. Grab yourself a fat cigar and a brandy. Echoes of Churchill are in the Bank.
Andrew Bailey was referring to the "Darkest Hour before the Dawn". The dawn is coming but many in our "tale of two economies" have always seen the light ...
The Saturday Economist
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