Subject: Economic Output Drops In January Lockdown ...

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                                                                                                       Saturday 13th March 2021
Hi Friend,
Economic Output Drops In January Lockdown ...
Hopes rise for the rest of the year ...
Economic output fell by 2.9% in January, as lock down returned to the UK. The month on month comparison was better then expected by many. Better than expected according to forecasts from the Bank of England. The Bank had been braced for a 4% setback, in the quarter as a whole.

Construction output increased by almost 1%. Manufacturing output fell by 2.9%. Sectors most badly hit were accommodation and food down by 30% and education down by 16%.

Commenting on the data, the Chancellor Rishi Sunak said "the figures highlight the impact the pandemic continues to have but we have reasons to be hopeful. We have set out a roadmap out of the pandemic, the NHS have vaccinated over 23 million people, and my budget set out our three point plan, to protect the livelihoods of the British people."

The chancellor will hope the January trade figures are just a blip and not the emergent trend. Britain's exports to the EU fell by 40% at the start of the year. The end of the transition period caused huge disruption to trade. Companies grappled with new paperwork and problems of logistics. The UK became an exporter of fresh air, as many import containers were empty, in their return to Europe.

The ONS suggested there were many factors in the disruption to trade, not just the problems at the border. There had been some stockpiling towards the end of last year, compounded by the effect of lock down at the start of this year.

The British Chamber of Commerce were more sanguine. Suren Thiru, head of economics said, "the slump in exports of goods to the EU, provides an ominous indication of the damage being done to trade, as a result of the border disruption."

This week, the EU threatened to impose tariffs as a result of the row over the Northern Ireland protocol. The EU is looking at legal options and legal action. Negotiations are failing. The EU considers Britain to be a partner which cannot be trusted, it is said.

In better new, this week, the OECD released their updated forecasts for the UK economy. Growth of 5.1% is expected this year, followed by 4.7% next. The Bank of England expects growth of 5% this year. The forecasts could well be revised up, as the full picture for the first quarter emerges.

Trade tariffs and problems of logistics, should not be a threat to recovery ...
Biden's $1.9 trillion stimulus approved ...
On Wednesday, the "House" passed the "American Rescue Plan". The $1.9 trillion stimulus to the US economy is valued at almost 10% of GDP.

The legislation will send $1,400 dollar checks to most Americans, with additional household spending on unemployment insurance and child support.

In the plan, individuals earning up to $75,000 dollars and couples earning up to $150,000 dollars, will each receive the $1,400 dollar bonus. The scheme will cost $400 billion dollars. More money, $500 billion, is allocated to FEMA, in addition to the $350 billion offered to state and local government.

Forecasts of growth in the US are expected to rise as a result of the stimulus. Fears for inflation are also rising as Uncle Sam performs the helicopter drop. The thought of more cash into communities, pushed ten year bond yields higher to 1.62%. Nasdaq and S&P closed higher in the week. The DOW joined the fun, moving to an all time high, clearing the 32,500 level.

China reported an increase in foreign purchases of sovereign debt in February. Overseas funds picked up a further $15 billion of assets following record purchases in the prior month. US treasuries are losing their "safe haven role. The extent of central government borrowing and central bank buying is compounding the problem. The yield of 3.2% on offer in China, assists the process.

Foreign Direct Investment, into China, increased by 34% in January and February. Investment in service sector projects accounted for 80% of capital flows. Investment from the EU showed the largest overall gain, followed by the ASEAN nations and members of the Belt and road initiative.

This week Bitcoin moved to $60,000 dollars. Just over ten years ago, 10,000 bitcoin were needed to pick up two Papa John pizzas. In today's market, that would value a pizza at $300 million dollars or $60,000 dollars per slice.

In other news this week, the financial world discovered non-fungible tokens. A record $60 million dollars was the closing bid at auction. The winning bidder owns a work of art in the form of a unique string of code, called a non fungible token. The piece has no physical presence and will be "delivered directly to the buyer, accompanied by a unique NFT encrypted with the artist’s unforgeable signature and uniquely identified on the blockchain," Christie's said.

Next week the news a SPAC or SPIV is pivoting to invest in Non Fungible Tokens, picking up Jack Dorsey's first tweet as the primary asset. I have been on Twitter since August 2007. It must be time to get the back catalogue valued ... for the bespoke TSE Special Investment Vehicle ... valued in bitcoin of course ...

That's all for this week ... stay safe ...
John
© 2021 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
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