 The government is under pressure to release London from lock down. The number of cases in the capital fell to just 500 over the last two weeks. The all clear signal looms, as the case load falls. Yes, the sirens may well be heard at the beginning of June.
At peak in April, London confirmed 1,000 cases per day. A steep decline has meant the average has fallen to just 50 daily. Just one case was recorded last Thursday. The excellent symptom tracker research at Guys Hospital under Dr. Tim Spector, suggests 2.2 million people were infected in the UK at the beginning of April. The average over the last few days has now fallen to 250,000. The Office For National Statistics data set suggests just 150,000 are infected, the vast majority north of Birmingham. Alistair Benn in a Reaction Weekend update, interviewed Professor Sunetra Gupta of Oxford University. Guptra is author of the model which states that "vast swathes" of the population had already been exposed to the virus by the time lock down began. "In almost every context, we have seen the epidemic grow, turn around and die away, almost like clockwork ... to me that suggests that much of the driving force was due to the build up of [natural] immunity." Social Distancing Measures could be ditched or certainly eased as the lock down eases. Public Health England suggested this week. Yvonne Doyle, medical director at PHE, confirmed the organization is amassing evidence to evaluate if the 2m rule is "absolutely necessary". The two meter rule is a "precautionary approach" and could change to allow closer contact! Really? The World Health Organisation, together with France, Hong Kong, Singapore and China all seem to think one metre is enough. Pubs, clubs and restaurants will welcome the change, allowing life to return to a degree of normality in the leisure sector. We are in the strange phase of transition. The guidelines have to be clear, concise and logical. The UK social distancing rule, is an international anomaly. Travel guidelines to the seaside, far from clear. Visiting grandparents in the North East of England appears to be OK for some but not for others. Why when we get there should we only see them, one at at time, in the garden, under police supervision? Priti Patel added to the confusion this week. Welcome to Britain pamphlets would be offered to visitors. Travel in your own vehicle, stay in one place, quarantine for two weeks and see nobody for 14 days. The police will check up on your movements or lack of them. Cressida Dick, Commissioner of the Met was swift to social distance from the policy. May the force be with you but not on this one Priti. Exceptions are to be made for farm workers and fruit pickers but not for business and tourism. Strange the priorities as policy unfolds, slowly to unravel as reality dawns ... Borrowing Hits £62 billion in April ... Economic policy was swift to unfold in April ... Eyes in Treasury must have been watering. Government borrowing surged to £62 billion. Revenues fell by 26%, expenditure increased by over 50%. Total debt increased to £1.9 trillion up to 98% of GDP compared to just 80% in July last year. Retail sales dropped in value by over 23%. The VAT take fell by 44% as many businesses opted for deferred payment. The overall tax take fell by 36% as the economy foundered. GDP is expected to fall by 25% to 30% in the second quarter. Rishi Sunak is now the most popular character in cabinet. The Chancellor is paymaster for almost one third of the working population. 1.5 million are unemployed, over 2 million have applied for Universal Credit. 7.5 million are now on furlough.The scheme will be extended into the third quarter of the year. The cost is expected to be £150 billion in a full year. It cannot continue for long. Businesses will have to chip in before the year is out. The gloves are off in Treasury. This week, the Chancellor warned this is a severe recession, the worse is yet to come. The unemployment rate will soar if the furlough scheme is cut back without a return to normality and soon. The release from lock down will continue. Ditching of social distancing will follow. The messaging has to change. It really is safe to leave home and get back to work ... That's all for this week. Have a great, safe, week-end, wash your hands, don't talk to strangers and stay alert!
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 China Slowly Returns to Normal ...
The Disney theme park in Shanghai has re-opened. Not quite business as usual, Mickey Mouse cannot pose with customers, selfies with Snow White are out of the question. Life in the leisure sector confronts the Covid reality. Face masks must be worn at all times, temperature checks take place at the gate. Timed entry slots must be followed. Visitor numbers are limited. Capacity in the park is limited to 30% of the usual 80,000. Children's play areas and theater shows remain closed. No street parades, no night shows, no close ups with characters. No touching the animals like Bambi and Thumper. Mr Sneezy remains in quarantine, that sort of thing. Despite the limitations, tickets sold out within minutes. Just as well, Disney needs the cash. Net income fell by 91% in the first three months of the year. China is slowly returning to normal. Industrial production increased by almost 4% in April. Car sales and smartphone sales are on the rise. Household consumption remains soft. Retail sales fell by 7.5% in the month. Almost one in five migrant workers have not yet returned to work. Analysts talk of small and gradual improvements. President Xi claims, "It is now time to get the economy back up and running". Infrastructure spending has increased by 5%. The Party plans a move away from traditional industries such as coal. Now is the time to develop an "affluent society" for all it is claimed. Probably just as well. Chanel and Louis Vuitton are increasing prices by over 15% on luxury items in Asia. High end fashion houses have reported brisk business in South Korea and China as stores re-open. Tensions with the West are augmented as the White House seeks to blame China and anyone else for that matter, for the Covid outbreak. Huawei remains a cause of concern. The Trump administration said it would impose further export restrictions on sales to the Chinese tech leader. Trade tariffs remain under threat. Trump threatened to cut ties with China completely in an interview with Fox news this week, saying he had no interest in talking to President Xi right now ... not my friend ... Hair Dressers Back in Business ... Hurray for the hirsute! Hairdressers will be allowed to open in July according to the latest statement from government. As expected, garden centres opened up this week. Further retail concessions will be made from the end of the month. Schools may open in June. Travel restrictions have been eased. We are in the strange twilight zone of transition. "Stay indoors", no longer the mantra, "Stay Alert" the new vogue call. "Stay Away" the plea from holiday resorts and beauty spots. Yorkshire and Cornwall tourist boards have asked visitors to stay away. The Lake District National Park has joined the call, to minimize the influx as lock down restrictions are eased. The National Trust is re-opening car parks, Jersey Zoo is open to visitors. Life is returning slowly to normal. London could be Covid free in weeks it is claimed, as the number of daily cases fall to 24 and the R(0) drops to 0.4. The all clear could be sounding sooner than most think. Just as well ... The latest data from the ONS suggests the UK economy slumped by 2% in the first quarter. Output in March fell by 6%. Manufacturing fell by 10%, transport and storage fell by 15%, accommodation and food fell by 30%. The fall in March is just a taste of what is to come. We expect a drop in output of over 20% in Q2. The OBR, the Bank of England and now NIESR, expect a shock to output averaging 30%. JCB announced layoffs this week with world wide sales down by 50%. The British Retail Consortium suggests retail sales fell by 19% in April. WH Smith report sales down by 85% as stores remain closed. William Hill demonstrated some flexibility with betting now focused on table tennis, darts and Belarusian football. The economy is in recession but the recovery will be swift. Output for the year as a whole will be down by around 12% but a steady recovery will follow over the next twelve months. Having spent eight weeks terrifying the population about the imminent threat to life, it will take a little more than a Sunday pep talk to convince the nervous it really is time to get back to business ... Now is the time to get the economy back up and running. That's all for this week. Have a great, safe, week-end, wash your hands, don't talk to strangers and stay alert! J  Garden centres will open on Wednesday, according to the latest information from government. Boris Johnson will make the critical announcement on Sunday evening. Over the borders in Wales, gardeners will have a two day start. The tills will be ringing from Monday on.
Manufacturers will be urged to get back to business. Toyota will open the engines factory following a two month shutdown. Bentley will be back in business on Monday. Jaguar will be back in action mid month. The government has formally extended the lock down for another three weeks. Cracks are appearing. The Prime Minister will announce the road map, to ease restrictions in the weeks ahead. The kids could be back in school by June. Fish and Chip shops could be back in business. At the Downing Street press conference on Friday, environment secretary George Eustace revealed it was now safe for take away shops to reopen. "Drive thru restaurants like McDonalds are made for social distancing" he explained. McDonalds and KFC are trialing store openings, Greggs pulled back on plans over fears of crowds in pursuit of vegan sausage rolls. The "Stay at Home" message may be abandoned. The "One Exercise Per Day" message may be ditched. Picnics, trips to the park and outings in the countryside may be permitted. Scientific advisers may be allowed visits, from special friends, that sort of thing. The family bubble plan has been popped. The idea that extended kinship groupings could be allowed to meet for Sunday lunch and special occasions has been dropped. Ministers feared family feuds over who would be in whose bubble, could augment social tensions at an already difficult time. Matt Hancock added to the confusion speaking to Kay Burley on Sky News. "There is strong evidence that outdoors, the spread is much lower. So there may be some workaround that some businesses, for instance cafes, especially over the summer, may be able to put in place." Tim Martin, take note. Sajid Javid, the former chancellor, urged the Prime Minister to "run the economy hot". Older people should be asked to stay inside, allowing younger people to get on with their lives" he explained. "They could help the rest of us by rebuilding the economy." Mixed messages add to the confusion about just what happens next. Too many ministers taking turns at the daily briefing add to greater confusion. Reliance on the R(0), fiddling the testing targets and now an over reliance on a socially intrusive tracking app will not help. The Prime Minister has a difficult task to explain the way out of lock down, tip toeing over the stepping stones to recovery. The economic argument is becoming imperative ... the time line is running short ... Car sales drop by 97% ... Car sales slumped by 97% in April. Just 4,000 cars were registered in the month, compared to 160,000 last year. 6.3 million workers have now been furloughed, a further 2 million are now on benefit. The Chancellor has made it clear the burden on state is unsustainable. The furlough scheme may be tailored in terms of sector and quantum, into the third quarter. This week the Bank of England added to the gloom. The Bank scenario forecasts assumed a drop in output of over 30% in the second quarter. GDP for the year as a whole would fall by around 14%, with unemployment increasing to over 7% in the final quarter of the year. Household consumption is expected to fall by 14%. Business investment is expected to fall by 26%. Economists are involved in a series of "how low can it go" forecasts. This week the bank has scooped the pool, as new Governor Andrew Bailey set the tone. Some good news this week. Ocado reported a sales surge of over 40% over the past two months. Online deliveries had soared. The company is struggling to meet customer demand. Warehouse capacity had been increased to 110,000 orders per week from 80,000 at start of year. Halfords reported an increase in cycling activity as a result of the lock down. Profits were predicted to be at the upper end of forecasts, following stronger than expected sales towards the end of the financial year. Most of the chain's shops and auto-centres remain open, with recommended social distancing measures in place. The Card Factory reported an increase in online sales of over 250%. Sales of personalized gifts has increased by over 50%. The company is scrapping the dividend to preserve cash and slowing the scheduled plans for new store openings. All store staff have been furloughed, reduced rents are in negotiation and purchases from suppliers have been cut. The reshaping may well be the model for recovery for many, in the way out of lock down ... That's all for this week. Have a great, safe, week-end, wash your hands and don't talk to strangers, J  Boris Johnson is back in action, the Prime Minister firmly in charge. The message is clear, we are past the peak, on a downward path, through the tunnel, into the light, where sunshine and green pastures await.
The virus has been wrestled to the ground. Now to spray the disinfectant of delivery, to eliminate the threat. The Health Secretary has reached the target of 100,000 tests per day. Albeit the Royal Mail assisted the challenge. 27,479 home testing kits were rushed out by post, to meet the target. One million tests have now been carried out. Just over 750,000 people have been tested. Approximately 180,000 tested positive. Almost 25% of the "sample" population were infected at the time of testing. Slowly we are beginning to realize, the infection rate may be much higher, than we are led to believe. It could be as high as 20% of the UK population. This is good news for the exit strategy and puts the fatality rate, tragic though this is, into a much better perspective. In 1918, the infection rate for the Spanish Flu in the UK was 20%. On the Diamond Princess, the infection rate was 20%. In New York, based on a sample of 3,000 undertaking antibody tests, the data suggests 20% of the population of New York may have been infected. Data from the excellent Covid Symptom tracker research at Guys Hospital led by Dr Tim Spector suggests 2.2 million people in the UK were infected with C-19 on the 2nd April. Since then the number has fallen to just over 300,000. Using the data and back casting, the implied data suggest some 12 million people may have been infected, by the time the 90 day episode is complete. The viral models are based on SIR mathematics. The Population at time (t) is either Susceptible, Infected, or Recovered. No thought of those with natural immunity. The population first divides into those with natural immunity and those who are susceptible. We know the NI rate among the young, is extremely high. The natural immunity rate in the population overall may well be as high as 80%. We always suggested the case for relaxation would be revealed at the end of April. Further relaxation and the all clear signal would emerge at the beginning of June. Ministers in the UK have to get Britain back in business and soon. This week, Dr Mike Ryan, from the World Health Organisation, praised Sweden as a model to implement a return to normality. Wetherspoons plans to open pubs next month. The government will relax the lock down in some way over the May bank holiday. Social distancing guidelines will be modified. Too many industries including travel and leisure will be crippled financially by controls on capacity, if the guidelines on SD are not eased. Test, track and trace is the new mantra. Shoving a swab down your throat, then up your nose, wrapping it up in plastic, to be tested in a distant lab, seems a bit old hat. New technology developed at Guys and South Korea is here to assist the process. Strange that NHS England is reluctant to work with the Guys App smartphone tracker ... A Global Recession is on the way ... The IMF have warned of a global recession, unlike anything experienced in the 1930s. Businesses will go bust on a huge scale and unemployment will spiral. The International Labour Organisation this week warned that half of the global workforce could lose their jobs. 1.6 million workers were at immediate risk of losing their livelihoods because of the pandemic. In the USA thirty million people are now out of work. Almost 20% of the workforce have lost their jobs since the end of March. Jerome Powell chairman of the Federal Reserve, said that economic activity would drop at an "unprecedented" rate. In the UK, we expect output to fall by 20% in the second quarter. Over 4 million workers have been "furloughed". Without government intervention, the claimant count would have increased to 15%. The full shock of a 20% shutdown would see the rate exceed 20% by the end of June. With a moderate return to work policy, the output shock would fall to 12% in Q3 and 5% in Q4. Even so, unemployment is likely to be 7.5% in the final quarter as GDP in the year falls by 10%. The government has to get Britain back in business. The CBI, British Chambers of Commerce, the FSB and Make UK have made this abundantly clear. As we said from the start, applying mediaeval measures of isolation, lock down and containment, to a contemporary economy, will drive us all back to the dark ages. A global recession is on the way to accelerate the process. Time to review the scientific advice, ease the lock down and find a way back in ... That's all for this week. Have a great, safe, week-end, wash your hands and don't talk to strangers, John  Good News this week! B&Q is set to reopen 155 stores following the shutdown announced by the Prime Minister, just four weeks ago. Manufacturers including Jaguar, Bentley and Aston Martin are returning to work.
House builders, led by Taylor Wimpey will return to building sites. Social distancing measures must be put in place. Only one man on a ladder at any one time, that sort of thing. Businesses are encouraged to return to work as soon as possible. Further relaxation of the UK clamp down will be made at the end of the month. Garden Centres are expected to open for the May Bank Holiday. A statement on early stage schooling may also be included in the package. In Georgia USA, gyms, hair dressing salons, bowling alleys and tattoo parlors are opening now, as Governor Brian Kemp prioritizes life for Americans in the South East state. In the UK, the government is concerned there appears to be some relaxation of stringent observance of the lock down measures. Car usage is creeping up, more people in the parks, loitering with intent to sunbathe. The NHS is worried, people are avoiding the health service. Essential treatments including cancer care avoided. The focus in policy is moving away from isolation, quarantine and lock down to testing, tracking and tracing. Grab a mask if you can get one. We are heading out. Herd immunity, didn't get much of a run, the mediaeval measures of containment are proving to be too expensive. Now the focus is on testing, testing, testing. At least it will assure the people, something is being done. The Treasury has been taken aback by the reaction to the containment measures. One in four staff have been furloughed under the government scheme. 430,000 firms and 3.2 million workers are now claiming support at a cost of almost £4 billion pounds per month. 80% of businesses in accommodation and food have closed. 70% of companies involved in entertainment and recreation have shuttered for the duration. 40% in construction, 30% in manufacturing, 25% in transportation and storage. Retail sales fell in March by 6%, much worse is to follow in the second quarter. Clothing sales slumped by 30%, alcohol sales jumped by a comparable amount, as the nation turned to drink. Primark reported zero revenues in April. Boohoo reported record revenues in the year to March. Online sales increased by 12.5% in the latest data, accounting for over 22% of all transactions, a record high. From the data now available, we estimate GDP (O) output based will fall by 20% in the second quarter. For the year as a whole, growth could fall by 10%. The recovery in 2021 will offset most, if not all of the gain. The real good news in the blue sky horizon ... hospital admissions in London and the South East are falling. The number of recorded deaths also appears to have peaked. Each death a family tragedy of course but the narrative is supporting an end to lock down. The social cost is high, the economic cost is astronomical … Treasury to borrow £225 billion ... The OBR forecast borrowing will increase by £270 billion in the current financial year, compared to £48 billion in the year to March 2020. The Debt Management Office is set to tap the markets for £225 billion in the current quarter. A combination of new funding requirement and current debt rollover. Market appetite is considered to be strong for the issue. Who would have thought the 30 basis points on offer for ten year gilts would lure buyers into the fray. The Bank of England is ready to act as the buyer of last resort should lenders shudder. The process of Dire Straits QE, "money for nothing, gilts for free" has never been so sorely needed on Planet ZIRP. Over in the US, Morgan Stanley estimate the deficit will be over $3.7 trillion dollars in calendar year 2020 and a further $3 trillion dollars next year. The government signed off on a $2 trillion dollar rescue package for the economy, over 4 million workers in the US sought unemployment benefit last week. 26 million have now made claims over the past five weeks as the pandemic measures hit the economy. Lay offs include staff from within the Trump empire including Mar-a-Lago. No wonder the President is keen to secure a return to work soon. The search for a miracle cure continues in the President's mind. Medical advisors shake their heads in disbelief at the meanderings of the stable genius. This week, the federal government scrambled Friday to stave off a potential wave of public health emergencies. The move was sparked by President Trump’s suggestion that injecting bleach or other household disinfectants into the body might cure people of the novel coronavirus. In Maryland alone, the state government’s emergency hotline received more than 100 calls from residents inquiring whether injecting a disinfectant really was a cure. Only in America, where 38% of beer drinkers insist they will not buy Corona beer as the pandemic sweeps across nation. That's all for this week. Have a great, safe, week-end, wash your hands and don't talk to strangers.  The government announced this week, the lock down will continue for another three weeks. The household siege, held over Easter. The continuation will run until the May Bank Holiday. It may be difficult to continue much into May, without some concessions to "Banged Up Britons".
Police in the parks urging people to "return to your homes, this is not a holiday" are not ideal You tube Clips for a laissez-faire Tory party. Matt Hancock was urged to present some "forward guidance" on when the lock up would be lifted. The Health Secretary could not resist. There would be five tests. Just like the five pillars of the Covid-19 tests. The results, not necessarily in order of importance ... "When the NHS had capacity to cope, when the fatality rate could clearly be seen to be falling, when the same would apply to the infection rate, when we were testing over a gazillion people each week and when the Prime Minister was back in Downing Street, to take the blame if anything went wrong, with a second wave." There is light at the end of the tunnel, the health secretary explained. The shortfall in PPE could be resolved, by urging front line staff to use essential equipment every other day of the week. More ventilators are on the way, soon to be redundant if latest medical advice is to be accepted. Just let patients lie on their stomachs, at least they won't be able to see what's going on around them. In the economy more widely, the Office For Budget Responsibility added to the economic gloom, predicting GDP could fall by 35% in the second quarter. No mystery to the mechanics, construction output is assumed to fall by 70%, manufacturing by 50% and the leisure sector by almost 90%. Unemployment could rise to over 2 million according to the OBR model. This week the ONS revealed that one in four businesses had closed in recent weeks as a result of the lock down policy. A further 38% had experienced a substantial reduction in activity. The OBR assumes a rapid rebound in the economy, once the second quarter has passed. The Adam Smith Institute warned on the other hand, that "without a plan to reopen the economy, there won't be one to do so." As we warned earlier in the month, applying mediaeval measures of containment to a contemporary economy, will risk driving us all back to the Dark Ages. There is a debate emerging between the cost of life and the cost of livelihood. It will be a tough call for a young cabinet. The data will not make this any easier. The case load of infections may have peaked in the UK but the outbreak is now following a "European path" rather than the Asian model precedent. The cabinet has another three weeks to assess the evidence. The health case, may yet pass the test, just in time to rescue the economy from significant permanent set back ... China : Economy shrinks by over 6% in the first quarter ... This week, China revealed the domestic economy fell by 6.8% in the first quarter.This was the first fall since records began in 1992. Industrial output fell by 8%. Investment fell by 16% and retail sales fell by almost 20%. The recovery will be hampered by the slow down in world trade and consumer caution in terms of spending plans and leisure habits. For the year as a whole, growth is expected to be around 2.5% compared to 6.1% last year. In the U.S. ... Mutiny on the Bounty ... It has been a tough week for the President. Trump experienced his worst melt down, ever according to reports from the White House Press Corp. New chief of staff, Mark Meadows is said to be overwhelmed in the role and has been reduced to tears on occasions. Meadows is the fourth in the office under Trump. The odds are, he will be the shortest tenured yet. This week Trump retweeted a call to sack Dr Anthtony Fauci, his own public health adviser. Funding for the World Health Organisation was suspended. The President blamed the WHO for assisting China, in a cover up of the initial outbreak and for criticism of his decision to suspend flights to China in January. The North East state governors were accused of plotting to sabotage his exit policy. The President was set to order the states to open on the 1st May, until it was explained this was a state decision and not one for the White House. Then came the tweet ... "Tell the Democrat Governors that “Mutiny On The Bounty” was one of my all time favorite movies. A good old fashioned mutiny every now and then is an exciting and invigorating thing to watch, especially when the mutineers need so much from the Captain. Too easy!" On Friday, Trump urged the Democratic States of Michigan, Minnesota and Virginia to "LIBERATE" the people and to start loosening the strict social distancing guidelines. "Set my people FREE" the president's exhortation. The announcement came the day after the White House issued new federal guidelines on reopening the economy. The plan is to ease restrictions on businesses, residents, visitors to Trump hotels and Mar-a Lago specifically. Goldman Sachs this week claimed the U.S. is past the worst. The number of infections does appeared to have peaked. The government and Federal Reserve have thrown some $6 trillion dollars at the economy. The President's name has been printed on the hand out checks. Still the unemployment number has surged by 22 million. The call for a return to normality is understandable. A sense of panic is sweeping through the White House. Election looms within months. The State Governors, Democrat and Republican alike, will be more cautious in the return to work strategy ... That's all for this week. Have a great, safe, week-end, wash your hands and don't talk to strangers, John For more frequent updates on our C19 tracker, join our Guild Group. We monitor the world Health Situation Reports every morning. Track with us, the progress of our forecasts of the outbreak.  In Denmark, day schools and nursery schools will open on April 15th. All other restrictions, including the closure of bars, restaurants, hair dressing salons and shopping centers will stay in place, until the middle of May.
In Austria, DIY shops and garden centres will reopen next week. Retail stores and hair dressing salons will be open, from the end of the month. In Spain, the lock down is to be partially eased. Factory and construction workers are to restart work. Most shops and offices will stay closed for the moment. In Sweden, schools, nurseries, bars, restaurants and sports clubs, all remain open. Social distancing is observed within reason. To date, there has been no dramatic surge in cases or fatalities. In the UK, the government is preparing options for an exit plan over coming weeks. Public Health England suggested schools could reopen, as coronavirus restrictions begin to be lifted. Head teachers are said to be lobbying, to reopen schools before the summer holiday, subject to scientific advice. Paul Cosford, the agency's medical director, said that easing the lockdown for the young was being considered. "The importance of children being in school is paramount". For the moment, the government has made it clear, it is too soon to consider reopening schools. The priority is to maintain the clampdown until there is clear evidence of a slow down in cases and fatalities across the country. Professor Ferguson, from Imperial College, in a Radio 4 Today programme said. "It's going to be several weeks before we can definitely conclude anything about the rate of decline and hence when measure may be lifted." The good news, as expected, the UK case load peaked last week. The garden centres could be allowed to re-open soon, if the good weather continues. The kids could be back in school 'ere too long. We continue to expect some social relaxation by the end of April, with a more extensive release by the end of May. "We don't want these measures to continue longer than is absolutely necessary" Professor Ferguson explained, "the economic costs, social costs, personal costs and health costs are huge" and so they are ... the economic costs, in particular, are simply unsustainable for too long ... Lock down to cost Treasury ... Reports this week, the lock down will cost the Treasury £2.4 billion per day as the shut down continues. The government has been shocked at the extent to which the social distancing measures have lead to a collapse in economic activity. The Chamber of Commerce reported this week, 20% of their members intend to furlough all staff, two thirds said they would furlough between 75% to 100% of the workforce. The Resolution Foundation, has suggested the government plan to subsidise wages could cost the Treasury £40 billion, every three months in which the scheme operates.The Bank of England has extended the Treasury's overdraft limit to assist with funding. Consumer confidence has plummeted. The unemployment rate is set to double. Car sales fell by over 40% last month, retail sales fell by 40% last week. Footfall in shopping centres and retail parks collapsed as traffic fell by over 80%. Construction output fell. The latest reports from IHS Markit's PMI dropped to 39.3 in March from 52.6 prior month. We await with some concern the data on manufacturing and the service sector, the numbers will not make for great reading within The Treasury. Capital Economics have suggested the economy could shrink by 15% in the second quarter. CEBR, the Centre For Economics and Business Research have suggested a 30% drop is possible. Using a relatively simple output and employment model by sector, it is pretty easy to arrive at a drop in output of 20% which would lead to a jump in unemployment to 20% without government intervention. In the US, JP Morgan is forecasting a collapse in GDP levels by 40% in the second quarter. Over 16 million jobless claims have been filed in the last three weeks. The number could rise to 25 million in April with the unemployment rate rising to over 20%. WeWork has warned it will be skipping some rents, McDonald's has warned of "difficulties" as sales fell by 20% last month. The World Trade Organisation has warned, global trade is heading for an ugly fall. Danny Blanchflower is warning of a second great depression. Most economists expect a rapid recovery once social sanctions are lifted. The lock down cannot continue for too long. In the U.S. the President is subject to conflicting advice from scientists and economists. The option to reopen the USA on Mayday would appear to be a step too soon even though the case load may have peaked in certain states already ... That's all for this week. Have a great, safe, week-end, wash your hands and don't talk to strangers, John For more frequent updates on our C19 tracker, join our Guild Group. We monitor the world Health Situation Reports every morning. Track with us, the progress of our forecasts of the outbreak. Our social media reach is now extensive, we had over 75,000 views of our LinkedIn post last week.  In Italy, the epidemic is slowing down. Following four weeks of shutdown. Italian officials say it will take until Easter to reduce infections sufficiently, to begin a relaxation of quarantine measures.
Sections of industry will be urged to return to work, under stringent safety conditions. Italian restaurants and bars are expected to begin to re-open at some stage later in May. In Spain, as expected, the case load peaked last week. Both Italy and Spain have recorded over 100,000 cases. The fatality rate is now 12% in Italy and approaches 10% in Spain. In the UK, 34,000 cases have been reported, the fatality rate is now 9%. The good news we expect the peak to be reached within days. The intense "quarantina" period will have been completed at the end of April. Some relaxation of home confinement restrictions may then be possible. Our analysis continues to suggest the crisis could be over by the end of May. The all clear sirens could be firing in early June. Restaurants and bars could be reopening in the month. Shoppers will return to the high street to snap up the bargains, as retailers shed stock. From the data available from China and the experience in Europe, we are able to produce a projection of the case load in the UK against a European index. Our C19 index (below) maps the progress of UK cases against the model projection. If we are right, the UK case load will peak early next week. Overall some 110,000 cases will have been experienced in the cycle by early June. Professor Neil Ferguson from Imperial College College, advising the government on the crisis, expects the case load to peak in the next week to ten days. He told BBC Radio 4 "The critical thing first is to get case numbers down. Then I am hopeful, in a few weeks time, we will be able to move to a regime which will be a little more relaxed in terms of social distancing". Boris Johnson and Matt Hancock, have urged people to stick with the guidance and stay at home, maintaining strict social distancing guidelines. "If observance is relaxed, that would move us to a slightly more pessimistic scenario" Professor Ferguson explained. Lord King, former Governor of the Bank of England, warned of "rebellion" if the shut down went on too long. Never one for sensationalism, he called for the government to set out an exit strategy and soon. "A lock down that lasts for months is unrealistic and will materially damage the economy." he said. In due course we will begin to model the impact of Covid-19 on the UK and world economy. As the virus sweeps across the USA, the impact on jobs and the economy is already quite startling. In the UK, the impact can only be partially mitigated by Treasury largesse. The government will set out the exit strategy soon. The case load must be seen to have peaked first. We cannot do otherwise. Applying mediaeval measures of containment, to a contemporary economy, will risk driving us all back to the Dark Ages .. Beijing takes the lead in world crisis ... As the domestic case load dwindles, Beijing is striving to take the lead in the world Covid-19 crisis. According to CNBC, this is the first international crisis in which China is actively taking a global leadership role. On social and state media, China continues to promote its shipments of medical supplies to hard hit countries in Europe and Africa. In the last few weeks. Chinese President Xi has been busy calling leaders across the world, rallying for global coordination in managing the outbreak. Health experts have been hosting video conferences with those from other countries to share the experience. Keyu Jin, associate professor of economics at LSE, explained "This is the opportunity of the century for China to build trust in the world and to rebuild its international image. China does not want to waste an opportunity like this. China will cement its place as a global power." In Washington, officials struggle to deal with the outbreak without offending President Trump. The President is convinced he is doing a great job, with an incredible grasp of virology and epidemiology. Who would have thought? Dr Anthony Fauci is the task force doctor and expert immunologist advising the White House. Dr Fauci has contradicted and refuted Trump's claims about the virus multiple times in recent months. His counsel cannot be but short lived. Reporters at the White House press conferences regularly play the "Where's Fauci" game. The Doctors absence at any time, leads to an assumption he has been relived of duty. Not to worry, the President has everything under control but won't be taking the lead on the world stage just yet. For more frequent updates on our C19 tracker, join our Guild Group. We monitor the world Health Situation Reports every morning. Track the progress of our forecasts of the outbreak and our timeline for relaxation. Our social media coverage is extensive, we had almost 50,000 views of our LinkedIn post last week. We are building our presentation for the Brabners Economics Webinar at the end of the month. More on this next to follow ... That's all for this week. Have a great, safe, week-end, wash your hands and don't talk to strangers, Watch the numbers not the headlines, John  In Beijing the rush hour is back. Travel restrictions are being removed. Life is slowly returning to normal. No new cases have been reported on the mainland for over a week now.
The government is urging a swift return to normal. Businesses are urged to use smart technologies to accelerate the process. Over 70% of small and medium size businesses are now back in action. Smaller businesses struggle to meet local authority regulations in place to control the virus. Distance working, within units, can pose problems, the supply of face masks is a further inhibiting factor. Remote working and smart manufacturing platforms are encouraged as part of the process. China is well set to facilitate the change. China's cloud infrastructure has grown rapidly over the past few years. The market grew by almost 70% in the final quarter of 2019, with a value of $US 3.3 billion. Alibaba Cloud accounts for 47% of the market, followed by Tencent Cloud and Baidu's AI cloud. Despite the economic shock of the viral outbreak, the acceleration of of cloud, will be one of the beneficiaries of the change in working habits likely to result. Despite the recovery from the viral outbreak, China faces the problem of a second economic wave as markets in the West face lock down. Output may have fallen by 10% in the first quarter. Further setbacks are expected in the second quarter. Forecasts for growth in the year have been reduced from 6.1% to 2.6% by CICC. Despite an expected bounce back in consumer spending and investment, exports may fall by as much as 20% as world demand slows. China's recovery offers hope to the West and should be a model for recovery. As expected the Italian daily case load topped out last week. Despite the higher number reported yesterday, our momentum model suggests the downturn will continue. Spain is now reporting higher numbers but should peak within days. The UK is set to enter the "eye of the storm", the numbers will accelerate in the week ahead. In the U.S. Trump is suggesting it could all be over by Easter. Our viral model suggests the end of May, early June, is more likely ... Rumours of Our Deaths Greatly Exaggerated ... The good news, rumours of our deaths are greatly exaggerated. According to the latest research from Imperial College, The lock down has been so successful, Britain is now on course for an estimated 5,700 deaths from Covid-19. "Our work shows that social distancing is working" said Tom Pike. Neil Ferguson, Professor Pike's colleague at Imperial college, presented a model analysis suggesting the virus would kill 260,000 people, had Britain maintained a less restrictive policy. "Left unchecked altogether, the death rate could have been as high as 510,000" he added. The 510,000 number, assumed an 80% infection rate. That's far higher than the Spanish Flu of 1918 and the experience of crew and passengers of the Diamond Princess in 2020. Both around 20% were higher than the reported infection rate in Wuhan province of around 1in1000. So should we take comfort from the latest volte face from Imperial? Of course. Wuhan province reported just over 3,000 deaths from almost 70,000 cases in a population of 60 million people. Pro rata the UK case load would be around 90,000 with a projected loss of life of less than 5,000. The adjusted rate would be almost 1% lower as many would die of natural causes. Bit gloomy this for a Saturday? I hope not. Numbers in the UK are set to accelerate over the next week. We expect the case load to peak within the next ten days. The viral episode should be over by the end of May. Social distancing measures should be easing by the end of April. The virus is behaving as expected, the strike on Downing Street, just part of the process. For most businesses, the focus is on cash and survival over the next few months. As with all things, this too will pass, sooner than many expect. Then comes the sunshine and the opportunity to benefit from the strong recovery expected. Fears of a second great depression, as with rumours of our deaths are greatly exaggerated ... That's all for this week. Have a great, safe, week-end, wash your hands and don't talk to strangers, Watch the numbers not the headlines, John  Thumbs up in Wuhan. The Checkpoints are taken down, travel restrictions are eased. The city hardest hit by the epidemic is slowly returning back to normal. Elsewhere in the country, other cities have been easing control measures. China has reported no new domestic cases for three days now.
The China viral episode is marked as a twelve week cycle, a perfectly "normal" pattern of viral distribution. The critical phase, the six week "quarantina" phase lasts six weeks. 95% of cases, (within two standard deviations of the norm), occur in this critical phase. Should we be surprised by this? Not really. Quarantina is the Venetian word for forty days. Forty days was the period of isolation for new ships arriving at port in the 14th century. Michael Levitt, the British American Israeli biophysicist, predicted the epidemic would disappear from China by the end of March. The Nobel prize for chemistry was the scientist's prize in 2013. His speciality is not epidemiology nor virology. For Michael Levitt, modelling the viral epidemic is a numbers game and a pretty simple numbers game at that. Levitt explains, "In exponential growth models, you assume that new people will be affected every day because you meet new people. But most of us meet the same people every day. You may meet new people on the bus or in public places but gradually most people will be infected or immune". To stem the epidemic, in the absence of vaccine, the virus must be starved of victims to limit the outbreak. The government may claim we have moved from the containment phase to the delay phase but this is not correct. Home isolation and social distancing are measures to contain the virus, there can be no delay. The viral episode self extincts. Neither can we flatten the curve. We can lower the peak of the outbreak by imposing radical social distancing measures and other "non pharmaceutical interventions". A viral spread is a mathematical function with three critical ratios, the infection rate, the reproduction ratio R(0) and the fatality rate. Assuming an R(2) ratio, ie patient zero infects two people, then 2 people infect 4 people and so on, in a population of 100 people, the virus runs out of victims after just five steps. Then the case load falls, just as dramatically as it has risen. In our C19 tracker we analyze the daily situation reports published by the World Health Organisation. Italy recorded over 5,000 cases yesterday. We are anxiously waiting for the tide to turn. The next few days will be critical. For Korea and Iran, along with China, it would appear the worst is over. In the UK,. the numbers will escalate rapidly in the days ahead. Further social distancing measures may be announced. It is important to watch the data to call the move. The worst could be over by the end of April, the all clear sirens may be heard by the beginning of June ... Our people must be told there will be an end to this ... Cometh the Hour ... Boris Johnson shut down the pubs, restaurants and clubs this week. We were all asked to self isolate in the case of infection. People over seventy were advised to stay indoors. The government is shutting down the leisure, travel and hospitality sectors in a bold measure to protect the population. The measures to deal with a plague or viral epidemic have not changed much since medieval times and beyond. Left untreated the economy could return to the dark ages. Cometh the hour, Cometh the man. The Chancellor announced his bold budget on the 11th March. It all seemed so irrelevant within the week. Fears that millions of jobs could be lost, prompted the most radical intervention to stem redundancies and layoffs. Payment of wages, Cash injections, VAT holidays, Interest Free Loans, Welfare Measures, an increase in universal credit, support for renters and much more. We are set to part nationalize the airlines and airport business along with the rest of the transport sector, The Treasury did not put a figure on the size of the bail out. The option to watch the economy lapse into free fall would have been too expensive with no prospect of a rapid recovery. Economists are forecasting recession. Borrowing is set to increase above the £160 billion in 2009/10. The bank has cut rates twice to ease the funding cost. The markets reacted by pushing up ten year gilt rates. Where will the money come from? More QE. The Treasury will fund the deficit. The Debt Management Office will issue the debt. The Bank of England will buy the debt, underwritten by the Treasury. The interest payments will be returned to the Treasury. They are guaranteeing the debt after all. So we are stuck on planet ZIRP with a plague on our financial houses. We cannot predict the impact on markets and economies until we have marked the path of the C19 virus. We will publish our regular C10 tracker updates, watch this space. We plan a series of webinars at the end of April. For the moment, stay safe, wash those hands and watch the data. Above all stay in touch. That's all for this week. Have a great, safe, week-end. |
The Saturday EconomistAuthorJohn Ashcroft publishes the Saturday Economist. Join the mailing list for FREE weekly updates on the UK and World Economy. Archives
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The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The presentation should not be construed as the giving of investment advice.
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