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Saturday 15th August 2020
Hi Friend,
GDP down 20% in Q2 ...
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| So what happens next ...
It's official. Output in the UK economy dropped by over 20% in the second quarter. The actual figure, year on year, was 21.7%, that's slightly better than our forecasts, since start of lock down.
Construction output fell by 36%. Manufacturing output was down by 22%. Service sector output fell by 21%. The leisure sector, accommodation and food, was down by almost 90%. Lock the doors and turn off the lights. Don't be too surprised if revenues take a hit.
So what happens next? Our multi sector model of output, GDP(O), phases in the gradual return to normality. We expect a V shaped recovery. Recoveries always are or have been, V shaped, since formal records began in 1948.
The "Eat Out To Help Out" has confirmed families will return to restaurants. Retail sales confirm consumers will return to high streets. The fans are desperate to return to the terraces, as football, cricket and rugby return to the screens. Car sales were up in July, house sales and prices are rising. The government is committed to infrastructure spending. The Bank of England is committed to liquidity in the banking system, Money supply, M4 based is rising in double figure growth. No return of austerity. The mantra is a return to normality. Strong growth will return in 2021. The year on year comparisons will have such a low base for comparison.
This year, our base case scenario is for an output drop in Q3 of 10% and a 5% drop in the final quarter of the year. For the year as a whole the economy will be down by 10%. This is in line with the Bank of England latest forecasts and the mainstream consensus view from the HM Treasury panel.
In the final quarter, travel and tourism will continue to impact on the leisure sector. Manufacturing will face the overhang of Brexit uncertainty. Construction, retail and distribution will remain down compared to prior year. The government really needs to set out the policy for travel and tourism. The industry is warning, a full recovery may take years yet.
The big challenge is the probable increase in jobs lost. Unemployment is likely to increase to 2.5 million to 3.0 million by the end of the year, unless the furlough scheme is extended. This week, Yo!Sushi announced the closure of 19 of 69 outlets, with the loss of 250 jobs. Fashion chain Jigsaw filed a proposal to close 20 stores with 200 redundancies. The restructuring in retail continues. There will be more to follow the CVA route ...
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| Dream Ticket ...
In the USA, Joe Biden has found his running mate. Senator Kamala Harris is on the platform. It's a dream ticket for Democrats, a nightmare for the White House.
Kamala Harris is a sitting U.S. senator. The daughter of immigrants from Jamaica and India, Harris was born in Oakland, California. The first black woman, an Indian American on a major party ticket. Harris could be the follow on President if Biden wins the election. Aged 77, he is expected to serve just one term.
Californian Senator since 2017, Harris was Attorney General in the State. A formidable intellect, skilled in interrogation and debate. "She takes pleasure in campaigning, making speeches, waving, laughing, smiling and pressing the flesh", according to the Washington Post. The VP debate with Mike Pence should make for great television.
Joe Biden has answered the call from the Democratic party. He ticked all the boxes, the party had demanded. A progressive, minority woman, who could succeed him as President in 2024, if not sooner! Trump reacted by calling the Senator a "nasty woman", a "very, very nasty woman", who was very disrespectful to Joe Biden in the primaries.
The Trump camp are struggling to position the Biden Harris ticket for attack. Birtherism returns, the suggestion Harris may not be eligible for office is met with derision from mainstream media and the democratic party.
Trump is behind in the polls. The election is just 80 days away. The momentum is swinging to the Biden Harris ticket. Markets are adjusting to the prospect of Joe Biden in the White House. With Harris on the platform, the Presidential campaign just gathered additional momentum ...
Trump complained this week, the water pressure from shower heads is too low. It is playing havoc with his hair style. "I don't know about you, but it has to be perfect. Perfect". The President explained.
Ah yes, soon we may have to say goodbye to our White House WTF feature in The Saturday Economist Live No Questions Asked! (Our new 30 minute show ... back next month).
That's all for this week! Have a great, safe, week-end ... Follow on Twitter for our Daily What the Papers Say Review.
John
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| | The Saturday Economist Live ...
We will be taking a break in August, as we work on our new format. We will return in September with a 30 minute monthly show, "The Saturday Economist Live - No Questions Asked" ... Just not quite sure when yet.
The Saturday Economist Live on Zoom ... Fast Moving, Content Rich and Fun ... |
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| © 2020 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
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