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 Secret Service is launching a massive security operation to protect the inauguration of Joe Biden next week.
More than 15,000 National Guard, thousands of police and tactical guards will be deployed. Eight foot fencing will be in place to protect the Capitol building.
The FBI, The National Guard, U.S. Marshals and a host of other Federal Agencies will fall under the control of the Secret Service. Joe Biden's close protection team has been hand picked to protect the Democrat President. The FBI is warning of armed demonstrations across the country next week. A repeat of the chaos in Washington last week is not possible.
Trump will not be attending the inauguration ceremony. It seems unlikely, he will take the time to pen words of guidance to the incoming President. The President will clear the swamp, on the morning of the 20th and head for Florida.
Trump became the first President in US history to be impeached twice this week. The President was reported to be angry at aides for failing to defend him. Rudy Giuliani's fees are at risk. Advisors have been told not to pay the $20,000 dollars a day clock rate. A high price for failure, too much for Trump.
The President's problems increased this week. Deutsche bank is reportedly seeking to withdraw support for the Trump Organization. The bank has some $350 million of loans outstanding. The Trump National Golf Club in Bedminster has been removed as the host of the PGA Championship in 2022. A serious blow to Presidential prestige.
Trump was banned from Twitter, Facebook and other social media platforms this week. Worse still he could be banned from ever taking public office again, if the Republican back lash continues in the Senate. Mitch McConnell, senior senator of the GOP, thinks the President could be guilty. The trial is looming in the Senate, Republican colleagues have been told by McConnel, to "vote with their conscience" ...
If McConnell takes the lead, a conviction seems probable... That's all for this week, stay safe, hands, face and space ... it's tough out there, say in touch ...
It was the best of times, it was the worst of times ... and that was just week one! The tale of two economies continues. The third lock down is imposed into the first quarter of 2021.
This week, the SMMT reported car sales down by 30% in the past year. Showroom sales were hindered behind lock doors. Marstons, the brewer of Pedigree and Hobgoblin, called for more help for the pubs and restaurant sector.
Mitchell and Butlers, owner of All Bar One and Harvester, is to tap shareholders for funds, to offset the slump in revenue. Chief Executive, Phil Urban called on the government for new support measures, to help hospitality businesses.
Ryanair announced cuts in flights and services, as traffic levels are expected to fall by 80% once again. Restructuring is expected at Paperchase, as PwC are appointed as administrators. The retail chain may claim the title, of the first, but not the last, high street victim of 2021.
Marks & Spencer boss, Steve Rowe, talked of "near impossible" conditions, resulting in clothing sales down 25% in the final quarter of the year. M&S non food retail stores sales were down by almost 50%, offset by 50% growth in online sales. Revenues from food, online and Ocado were able to offset some of the high street damage.
Therein lies the reality of the "Tale of Two Economies". Sector losers during the pandemic have been clothing and retail, travel and tourism, food and accommodation, leisure and entertainment. Sector winners have been, food, online retail and logistics. Online food sales have doubled. The share of online sales overall has increased to over 30%. Digital acceleration online and into cloud, has become the "modus operandi" for all
This week ASOS announced a £90 million investment in a new 450,000 distribution warehouse. Joules and Next reported record sales online. Moonpig is planning a £1 billion flotation within the month. DIY sales, gardening and pets have been additional beneficiaries. Pets at Home, reported a surge in profits as home owners added pets to ease the pain and isolation of lock down.
Streaming has provided exceptional online growth for music and movies. Streaming accounted for 80% of music consumption over the past year. Netflix and Disney have enjoyed a surge in share price as a result of the home entertainment boom. The top seven digital stocks have surged in value by $3.5 trillion over the past year.
Barratt Developments reported record home sales in the second half of the year. New mortgages hit a record high in December. House prices ended the year up over 7% higher. Businesses like Rentokil were able to clean up, as hygiene demands increased.
Then of course there is Brexit. Finally after four years of confusion, the oven ready deal emerges slightly overcooked from the heated negotiations. A free trade deal, outside of the customs union, with a border down the Irish Sea and a bigger catch for UK trawlers, is the result. More catches to come for UK exporters in the future, no doubt.
Next week we will take a closer look at growth forecasts for the year in prospect ... an act of foolishness in the epoch of incredulity ... perhaps, don't miss that!
Trump and Tariffs, Boris and Brexit, have been the focus of concern over the past four years. Brexit deal done. Trump is out. Now we are able to focus on the impact of virus and vaccines as the world recovers from the pandemic.
Trump has finally come to realize he will not be the one inaugurated on the 20th of January. The shocking scenes in Washington forced the 45th President of the United States to accept Joe Biden will take office later this month. The President will now work towards an orderly transition. He will not be attending the inauguration, to assist the process.
We can but hope his right wing supporters do the same. Or at least a ring of steel will be in place in Washington to defend proceedings. Far better than the ring of silk in place around the Capitol last week. Too many lives lost so needlessly. It could easily have been far worse.
Trump is facing pressure to resign or face impeachment for a second time. "Incitement to insurrection", never a great feature on a presidential CV. The President insisted he only wanted to encourage a large peaceful protest. Not the storming of the Senate and the desecration of Nancy Pelosi's office that resulted.
Trump faced the ultimate indignity. Impeachment he can cope with but the imposition of a Twitter ban was the step too far. The President was furious, insane with anger, beyond the pale and mentally unreachable, the reports from the White House.
He had been forced to make a conciliatory broadcast, to denounce the violence. "The recording had the slight air of a hostage video, in which a captive is made to read words written for him." according to Gerard Baker in the Times today.
Trump's days as a hostage in the White House are numbered. Nancy Pelosi is taking no risks. The keys to the nuclear launch codes are out or reach. In Washington last week, it was the worst of times, the best is yet to come, hopefully within days ...
The Saturday Economist
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