of GDP, retail sales and borrowing ...

Next week the ONS will release the first estimate of GDP for Q1 2014. Expectations are for growth in the UK to be between 3% and 3.3% for the first three months of the year. The UK will be the fastest growing country in the developed world. A soggy start to the year may have damaged hopes in Washington to a claim on the title. Our own forecasts, realised last month, are at the bottom end of the range at just 3%.

The Chancellor is creating a great platform in the run up to the election. Growth up, inflation down, employment up, borrowing down. Just the trade figures will continue to disappoint. The Osborne model for “austerity in recovery” may provide the textbook examples for the revisionist theory in the years to come. Four out of five rabbits ain’t so bad! The good news continued this week …

Car Manufacturing
According to the SMMT, car manufacturing picked up the pace in March as home and export markets improved significantly. UK car production rose 12% in the month to 142,158 units, bringing year to date growth to 2.9%. Good news for the UK’s volume manufacturers as European demand for cars strengthens. Not so good for the balance of payments. The growth in output will do little to offset the strength in domestic sales. New car registrations increased by 14% in the first three months of the year.

Government Borrowing
Better news on borrowing. Public sector borrowing totalled £107.7bn in the financial year. The out turn is  £7.5bn lower than the £115.1bn borrowed in the prior year. Receipts were up by 4% with expenditure increasing by just 1%. The trend is heading in the right direction. The OBR expect borrowing to fall to £95 billion over the next twelve months and £75 billion in the following year.

At the end of March 2014, public sector debt excluding temporary effects of financial interventions was £1,268.7 billion, equivalent to 75.8% of gross domestic product. Net debt has doubled since the end of the 2008/9 financial year.

Retail Sales
Even better news. Retail sales in March increased by 4.2% in volume and by 3.9% in value terms. Average prices of goods sold in March 2014 showed deflation of 0.5%. Fuel once again provided the greatest contribution to the fall in prices. The figures are consistent with the latest CPI data. But as we warned last week, oil prices Brent Crude Basis are now tracking ahead of last years levels for April and May. The deflationary shock may well be over. Domestic earnings are rising and world commodity prices are turning as the world and European recovery particularly, gathers momentum.

Online sales were strong once again. The amount spent online increased by 7.1% in March 2014 compared with March last year. On line sales now account for almost 11% of total sales with a marked growth in food sales on line, increasing by almost 14%.

Corporate Strategy Series
Watch out for our Amazon case study coming soon. Over the Easter holidays, we released the second in our international corporate strategy series. The LEGO case study, follows on from the Apple Case Study originally developed for the Business School in Manchester. The third in the trilogy, Amazon will be released next month. Amazon is a great case study in how to grow (or how not to grow) an online business. Amazon with losses in 2000 of $1.4 billion on sales of $2.8 billion is probably the greatest example yet of a turnaround from burn rate to earn rate. How long can the Amazon model continue to grow? Is there much point in delivering salads in Seattle as part of the Amazon Fresh programme? Watch out for news of the release date.]

So what happened to sterling this week?
The pound closed up against the dollar at $1.681 from $1.679 and unchanged at 1.215 against the Euro. The dollar closed at 1.382 from 1.382 against the euro and at 102.15 (102.42) against the Yen.

Oil Price Brent Crude closed at $109.54 from $109.76. The average price in April last year was $101.2.

Markets, the Dow closed down slightly at 16,370 from 16,408 and the FTSE also closed up at 6,685 from 6,625. The markets will have to rally soon, if we are to sell in May and go away!

UK Ten year gilt yields closed at 2.66 (2.70) and US Treasury yields closed at 2.67 from 2.72. Gold moved up to $1,301 from $1,293.

That’s all for this week. Join the mailing list for The Saturday Economist or forward to a friend.

John
© 2014 The Saturday Economist by John Ashcroft and Company. Experience worth sharing.

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