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 ...
Want to know more? Don't miss our next online update on the 26th June. The Saturday Economist is now on ZOOM. "Informative, content rich and fun", the feedback from our attendees in May, Register today, don't miss out ...
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" ...
"Open And They Will Come" ... the message to the retail sector. Shopper numbers jumped by over 30% as consumers rushed back to high streets and retail parks. Stores are re-opening to buyers with money to spend.
High Street footfall increased by 32% compared to last week's Bank Holiday numbers. Traffic to shopping centres increased by almost 40% according to Springboard research.
Consumers are prepared to wait for the privilege of spending money. Would be "DIYers" added a new dimension to the "B&Q" marque. Shoppers outside the IKEA store in Warrington formed a line almost one mile long, as it zigzagged across the car park. People queued from 5:30 in the morning allegedly. Always important to get an early start with flat pack, the rest of the day, so easily squandered in assembly.
To keep things in perspective, the number of shoppers at all destinations was down by 60% compared to last year. Not all stores are open as yet but there has been a change in attitude. According to Diane Wehrle, Springboard's insights director, "There has been a change in mindset. People are regarding lock down as not over but in it's closing phase".
Car showrooms and outdoor markets were allowed to open this week. Just as well, new car registrations in May were down by 89% compared to last year. Just 20,000 new cars were registered in the month. Optimists should look to the fourfold increase, on the 4,321 cars registered in April.
Consumers are returning to the stores and they will have money to spend. Household balance sheets are improving. A record £7.4 billion of unsecured debt was repaid in April. Consumers paid off £5 billion in credit card debt and £2.4 billion in personal loans over the month. Savings rates are increasing. There is a limit to how much can be spent on takeaway meals, alcohol and "Animal Crossing" upgrades.
Taylor Wimpey, one of the UK's largest house builders, reported a sharp rise in consumer interest, as it reopened sales centres and show homes this week. The national order book continued to increase. The company reported almost £3 billion of orders, on over 11,000 homes, a 6% increase on the same period last year.
As we explained in our Monthly Round-Up on Friday, the recovery in the UK will be much swifter than many expect. Problems will remain. The furlough scheme will be curtailed. Job losses will increase. The unemployment rate will increase to almost 10% by the end of the year.
Want to know more? Don't miss our next online update on the 26th June. The Saturday Economist is now on ZOOM. "Informative, content rich and fun", the feedback from our attendees last week, Register today, don't miss out ...
Eurozone Boost as ECB steps up ...
Christine Lagarde, President of the European Central Bank, announced a further €600 billion of bond purchases this week. The package of measures increased to €1.35 trillion in the current round.
The President warned the euro-zone faced "severe job losses and exceptional uncertainty". "There has been an abrupt drop in economic activity" it was noted.
Bond buys will run until June next year, six months longer than originally planned. A further stimulus is expected. "Net asset purchases will continue until the virus crisis phase is over". Almost €250 billion was spent in the first two months of the new scheme. The focus was on Italian bonds in the initial phase. The ECB is likely to buy €1.7 trillion of Eurozone assets this year, stepping up as the "buyer of last resort" for central governments in the club.
Angela Merkel, announced a fresh stimulus package for the German economy this week. $146 billion is to be spent to support the economy. VAT is to be cut from 19% to 16%. Cash support for families with children will be included. The rebate on the car buyers scheme will double. Money for climate change, innovation and the digital economy will follow.
The package is likely to increase pressure on the people's favourite Rishi Sunak to follow suit. The car industry is pushing for a "scrappage" scheme, to stimulate the car sector. The retail industry is pushing for a VAT reduction to stimulate the high street. The Chancellor will reserve action for the Autumn budget. The Treasury abacus is still rattling, as the cost of the furlough scheme, is brought to account.
Markets rallied this week. Our nine indices around the world all moved higher. The NASDAQ moved to an all time high. A test of 10,000 is sure to follow. Sterling rallied to $1.27, the trading range well defined.
That's all for this week. No talk about Trump! It has been such a quiet week in the White House Bunker.
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 ...
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for updates on the UK and World Economy.
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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.