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
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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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