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Saturday 8th August 2020
Hi Friend,
Car Sales Up in July ...
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| Bank Holds Rates ...
A flicker of life on the forecourt. Car sales were up by 11% year on year in July. Private sales were up by 20%. Fleet sales were up by 5%. Business sales were down by 20%. Time yet for those purchase orders to be signed before the end of the year.
The recovery is expected to continue. Hybrid sales increased by over 250%. Diesel sales were down by over 25%. Mike Hawes, Chief Executive of the SMMT remains cautious, "showrooms have only just opened nationwide but there is still much uncertainty about the future."
"Much uncertainty about the future perhaps", but the latest IHS Markit / CIPS data points to continued strong recovery in manufacturing, services and construction. Output in the manufacturing sector hit a three year high. The rate of growth in services and construction was the highest for five years. All sectors reported an index reading into the mid 50s, confirming a strong recovery from the Q2 setback.
Data next week is expected to confirm UK GDP fell by 20% in the second quarter. The Bank of England expects the fall for the year as a whole to be 9.5%. The bounce back in 2021 is expected to be around 9%. This is significantly better than the "Old Lady's" earlier prognosis. The V shaped recovery remains in play.
The MPC held base rate at 0.1%. The stay-cation on Planet ZIRP continues. The stock of government debt will be held at £745 billion. The Bank will continue as "buyer of last resort" to meet the extensive borrowing requirement this year. When questioned, the Governor confirmed "Negative Rates" are now in the tool box. The reassuring news, no one is reading the instruction manual, just yet.
Unemployment remains a significant concern, as the furlough scheme unwinds. The Bank expects the number out of work to be 2.5 million by the end of the year as the U-rate increases to 7.5%. The pressure is increasing on the Chancellor, Rishi Sunak, to extend the furlough scheme to the end of the year and into 2021.
It will take more than the "Eat Out to Help Out" campaign, to restore the fortunes of the leisure sector. Hopes for travel and tourism were set back, as quarantine bridges were blocked to Europe and elsewhere. News that "pubs may have to close, if schools are to re-open" just added to the mixed message confusion.
The job losses will be both structural and cyclical. The furlough scheme will have a continued role to play for those sectors, late to recovery in the cycle. For the moment, the Chancellor remains unmoved ... but back bench pressure is increasing ...
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| TikTok goes the cold war clock ...
The President is behind in the polls. The pressure on China is increasing. This week Trump signed an executive order banning TikTok in the US. A forced sale to Microsoft may follow. Trump is expecting a slice of the action, for the arranged marriage.
Huawei, TikTok and now WeChat. The Tencent App was added to the hit list this week. The clear and present danger threat continues. The anti China stance makes for great ratings in the Trump camp, masking the problems with his handling of the Covid crisis.
Sanctions were imposed this week on eleven Chinese state officials including Hong Kong leader, Carrie Lam. The Treasury department singled out Lam for her role in "overseeing and implementing Beijing's policy of freedom and democratic process."
Trade sanctions, consulates closing, social media apps banned. Chinese companies listed in the USA have been given notice of compliance with US accounting norms or face de-listing.
This week, the State Department announced the highest level visit to Taiwan in decades. The US Health Secretary is to lead a delegation to Taiwan to discuss the pandemic and to "celebrate the shared value of the two democracies".
The visit is adding to tensions between Beijing and Washington. China's ambassador to the US, Cui Tiankai, has warned military activities in the South China Sea are increasing the risk of potential confrontation. The US is garnering allies in the region. The US led "Five Eyes Alliance" including Canada, UK, Australia and New Zealand is turning its gaze to the East. New Zealand changed course last week and aligned with other alliance members in suspending the extradition treaty with Hong Kong. The move was in protest against Beijing's decision to impose the new national security law in the province.
Japan this week announced an interest in joining the alliance. Defence Minister, Taro Kono said the five members "share basic values with Japan" and Japan wants to "continue to cooperate closely with the five countries."
The clock is ticking to the election in November. TikTok goes the cold war clock. "I don't think a new cold war would serve anybody's interest" said Cui Tiankei this week, "why should we allow history repeat ... when we are faced with so many new challenges? ... why indeed ...
That's all for this week! Have a great, safe, week-end, eat out, help out, remember, hands, face and space ...
John |
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