|
Saturday 13th February 2021
Hi Friend,
UK Recovery Like A Coiled Spring ...
|
| Set To Bounce Back ...
The UK economy is like "a coiled spring", set to release lots of financial energy, according to Andy Haldane Chief Economist, at the Bank of England.
Consumer confidence will surge back, the economy will be firing on all cylinders. Success with the vaccination programme and an easing of lock down will assist the process.
The change in sentiment is likely to be rapid. People are desperate to get on with their lives. Pubs, sports and cinemas will benefit. The Bank believes household and business balance sheets are in good shape. Consumers have been forced to reign back spending on leisure, entertainment and holidays. Many households have strengthened their finances and have money to spend. "The recovery will be a year to remember, after a year to forget." says Haldane.
The leader in the Times today takes up the positive theme. "Remarkable progress with vaccinations could set the stage for a powerful recovery this year, fueled by businesses and households flush with cash." Businesses are sitting on an £100 million cash pile. British households have amassed an astonishing £250 million of cash apparently.
The bullish outlook tends to overlook the rise in unemployment to 5% by the end of last year. Almost two million are out of work. Three million are claiming universal credit and four million are furloughed. The latest ONS data suggests UK GDP fell by 9.9% last year. The worst fall, since the year of the great frost, in 1709.
Manufacturing output fell by 10%. Construction output fell by over 12%. Service sector output fell by 9%. The hotel and restaurant sector almost halved in terms of output. The continued lock down in the first quarter suggest a further modest set back in the economy, to start the year.
The Chancellor will have little option but to extend the furlough scheme and introduce additional business support measures later into the year. Any thoughts of tax hikes should be put aside for the moment.
The Bank of England is forecasting growth of 5% in the current year. NIESR has a more modest 3.5% on the ticket. We expect the estimates for last year to be revised up. The 9.9% estimate is based on an amalgamation of three measures of output. Details of which, have not yet been published. The GDP(O) measure reports the setback last year, was nearer 9% than 10%.
Either way the prospects for a strong recovery, are in place this year. The vaccination programme has been a huge success. We expect the lock down to ease, as we move into Easter. The out turn for the year could even surprise the optimists in the Bank. It will be "a year to remember after a year to forget" ...
|
| XI reverses the charges ...
President Biden told reporters this week his call with President Xi Jinping lasted two hours. Biden said it was a “good conversation” between two leaders who know each other well. The two leaders exchanged views on world health, climate change and weapons proliferation.
The US President touched on the sensitive areas of the crackdown in Hong Kong, the suppression in Xinjiang province and the aggressive moves on Taiwan.
President Xi made it clear, such issues were "internal affairs". Matters in which, the US should not seek to interfere.
President XI advised cooperation as the only correct choice for the two nations. Confrontation between the two nations would be a disaster. The key is "mutual respect, equal treatment and the handling of issues in dispute in a constructive and positive manner."
Biden seemed impressed by China's advances in transportation, particularly in the areas of high speed rail and electric vehicles. The US has a lot of catching up to do.
China's high-speed railway network is the largest in the world. The network reached 36,000 km (22,000 miles) in total in 2020, with plans to reach 70,000 km (43,000 miles) by 2035.
In the US, Amtrak's Acela Express, is the US only high speed rail service. The entire route from Boston to Washington, covers less than 500 miles and takes over six hours to navigate.
The President made the call, for Uncle Sam to step up, to compete effectively in areas of new technology. The administration promises to jump-start the clean-energy sector. It faces an uphill climb. The United States has fallen behind Asia and Europe, in the race to produce the high-tech batteries, powering electric cars and storing solar and wind energy.
China dominates battery production today, with 93 "gigafactories" manufacturing lithium-ion battery cells. There are just four in the United States, according to Benchmark Mineral Intelligence. If current trends continue, China is projected to have 140 gigafactories by 2030, Europe will have 17 and the United States, just 10.
China now leads the world as the leading destination for Foreign Direct Investment. Soon it will lead the world in Artifiicial Intelligence. China now has one billion internet users and claims an 80% share of world users of 5G. The largest learning networks lead the AI race.
In digital currency, China's plans are well advanced. Beijing will hand out $1.5 million in a further trial of the central bank's digital currency during the lunar holiday weekend. The total of 10 million yuan will be distributed through 50,000 parcels of 200 yuan. This marks the third major test of the digital currency under development, by the People's Bank of China.
China is set to overtake the US as largest economy in the world by 2028. Shares of world trade have been boosted on the back of the virus recovery. The potential remains huge. By the end of the decade, China will still struggle to enter the top 50 countries in the world, in terms of GDP per capita.
The priorities for the Biden administration will be to rebuild the industrial base, develop an edge in innovation and accelerate investment in semi conductors, artificial intelligence, biotech and clean energy. A review of the tariff policies both with China and with Europe is set to follow.
"We looked at what the Trump administration did over the last four years and found merit in the basic proposition of an intense strategic competition with China. But we found deep problems with the way in which the Trump administration went about that competition."
"'The approach, depleted the core of American strengths, putting the US in a weak position to carry out that competition. Overreach on technology restrictions, inhibits the development of US business and could push other countries toward China."
A more positive decision on TikTok is expected as the Biden administration determines its own response to risks. The Biden administration's review is being led by officials who have been critical of Mr. Trump's targeting of Chinese tech companies.
It is said, Biden's strategy will be driven by an awareness ..."The lions share of the history of the 21st century will be written in the Asia Pacific region", most of which will be outlined on the Chinese mainland.
Confrontation would be a disaster. Cooperation would be a move in the right direction. Co-opetition would be the way forward, especially in areas of new technology and infrastructure.
President Biden may have made the call but President Xi reversed the charges. It should be a wake up call for Uncle Sam ...
That's all for this week, stay safe, hands, face and space ...
John
|
| | | | |
© 2021 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
______________________________________________________________________________________________________________
The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The receipt of this email should not be construed as the giving of advice relating to finance or investment.
______________________________________________________________________________________________________________
If you do not wish to receive any further Saturday Economist updates, you can unsubscribe or update your details, using the buttons below or drop me an email at jkaonline@me.com. If you enjoy the content, why not forward to a friend, they can sign up here ...
_______________________________________________________________________________________
We have updated our privacy policy to address Europe's General Data Protection Regulation (GDPR). The policy changes include explaining in more detail how we use your information, including your choices, rights, and controls. We have published a GDPR compliance page about the regulation and the steps we have taken as part of our compliance process. Your privacy is important to us.
For details of our Privacy Policy and our Terms and Conditions check out our main web site. John Ashcroft and Company.com
_______________________________________________________________________________________________________________
Copyright © 2020 The Saturday Economist, All rights reserved. You are receiving this email as a member of the Saturday Economist Mailing List or the Dimensions of Strategy List. You may have joined the list from Linkedin, Facebook, Google+ or one of the related web sites. You may have attended one of our economics presentations. Our mailing address is: The Saturday Economist, Tower 12, Spinningfields, Manchester, M3 3BZ, United Kingdom.
|
| |
|
|
