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 Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for FREE weekly updates on the UK and World Economy.
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