CBI sees signs of rising business confidence, while Lloyds data shows growth in seven of England’s nine regions
Britain is starting to see green shoots of recovery as business activity picks up, companies continue to hire new staff and consumers start to spend again.
A series of surveys published on Monday suggest the UK is on the road to recovery after its double-dip recession, providing a boost for chancellor George Osborne.
Business lobby group the CBI expects the economy to grow by 1% this year and 2% in 2014. That contrasts with the IMF, which recently slashed its growth forecast for the UK from 1% to 0.7%, and suggested Osborne should rethink his austerity programme.
The CBI has consistently supported the chancellor on austerity, although it has called for more measures to boost growth. John Cridland, director general of the CBI, said on Monday: “The UK economy is moving from flat to growth.”
But he warned that the country continues to face big challenges. “Although recent data suggests rising business confidence, the economic climate remains tough, hampering demand here and overseas. Meanwhile, consumers remain under pressure, as inflation continues to outstrip wage growth.”
In April, business activity grew at its fastest rate in eight months, according to Lloyds TSB’s purchasing managers’ index. The PMI – which is based on data from 1,200 manufacturing and services companies – came in at 52.2 in April, up from 51.6 in March, moving further above the 50 mark that separates growth from contraction.
The survey showed growth in seven of England’s nine regions, led by Yorkshire & Humber with a reading of 55.7. Only the West Midlands and the North East reported a slight reduction in business activity, hit by a weaker performance of the manufacturing sector and spending in those regions.
Elsewhere, it seems Britons are going out more and parting with their cash, cheered by the warm weather. Barclaycard said spending rose 3.6% last month compared with April last year, led by 21% growth in spending on cinema and theatre tickets. Restaurants also benefited with an 11% increase in spending, as did DIY stores, up 8.5%. Growth in spending online continued to outstrip the high street, up 11.7% on last year, compared with just 1.7% in bricks and mortar shops.
Valerie Soranno Keating, chief executive of Barclaycard, said: “Although economic data is generally mixed, this is the first time since 2011 that we’ve seen growth above 2% for three consecutive months, which may suggest a more sustained improvement in sentiment.”
A forward-looking survey of the jobs market suggests it too is looking healthy, with growth in employment set to continue in the second quarter. The Chartered Institute of Personnel and Development said more employers are expecting to increase headcount than those who intend to cut jobs, with a balance of +9, up from +5 for the previous quarter.
Gerwyn Davies, CIPD labour market adviser said: “Even though last month’s official figures showed a slight dip in the level of employment, these findings suggest that further employment growth is possible.”
But he notes that the number of jobs being created may fail to keep pace with the population growth, meaning unemployment could still rise.
New surveys suggest the British economy is picking up
Waitrose lawyers looking at deal details after Ocado looking at tie-up with Morrisons
Ocado has dropped 8% on concerns about the effect of its proposed tie-up with Morrisons on its existing deal with Waitrose.
As the Guardian reported on Friday, lawyers for Waitrose are poring over its deal with Ocado to see if any move by the online grocer to help Morrisons set up a website would constitute breach of contract.
The news followed a protest vote by shareholders at Ocado’s annual meeting on Friday over board pay packages, including a 30% salary rise for chief executive Tim Steiner.
Ocado’s shares – which have been up sharply in recent days in antipation of the Morrisons deal – are currently down 18.2p at 206.4p. Analyst Clive Black at Shore Capital repeated his sell recommendation, saying:
The business seems to be evolving from an aspiration to be a proprietary retailer into a landlord of its two customer fulfilment centres and licensee of its kit to third parties. Whilst a notable potential change in strategy, it could be argued that it signals an admission of defeat by Ocado; so the introduction of Plan B.
We believe that Ocado is playing with fire in speaking to another British supermarket group, as it tries to utilise its substantially greater fulfilment capacity, because the group’s umbilical cord to Waitrose may be cut sooner than we anticipated and Ocado cannot exist as a commercial entity without Waitrose in our view.
Whilst Ocado states that any agreement with Morrison’s would not be a conflict with Waitrose, we see the mood of [Waitrose chief executive Mark Price] as being deadly serious. As such, Ocado may have irreparably polluted a commercial relationship upon which it is dependent and it must lead to a greater chance of a break in 2017 in our view. Additionally, Waitrose’s understandably forthright stance means that the prospect of Morrison and Waitrose brands simultaneously utilising Ocado’s fulfilment centres and vans is low. As such, the extent of a tie-up between Morrison and Ocado needs to be pencilled down, along with it the financial extent.
The strong appreciation of Ocado’s shares makes the stock more attractive for investors to bank gains and effectively short to our minds. Aside from now uber-stratospheric valuation multiples, the stock does not offer the prospect of a dividend anytime soon either, unlike all of its UK listed food retailers. Whilst we pride ourselves on taking reasonably long-term and strategic views of companies and industries, the time horizon for Ocado to be meaningfully profitable so that it pays a dividend to its shareholders is very extended; in fact it probably remains decades away, if ever. Now, many investors commendably operate on multi-decade timescales, but again, we believe that this is not applicable in Ocado’s case because it is selling multi-temperature foodstuffs where margin expansion potential is structurally low.
Eurogroup will decide today whether to approve aid tranches for Greece and Cyprus
British Retail Consortium’s three-month average, which irons out distorting effect of Easter, shows growth slowed to 2.6%
Retailers suffered a 2.2% drop in sales last month compared with a year ago, thanks to the timing of Easter and wintry weather, according to industry figures.
The British Retail Consortium’s three-month total growth average, which irons out the distorting effect of Easter falling in April last year and March this year, was 2.6%. That was a slower pace of growth than in the three months to February and March and the BRC said a recovery in consumer spending remained elusive.
“There’s a sense that people are more prepared to spend than they were but chief executives are telling me that’s volatile. A convincing trend towards revival is hard to spot and competitive pricing is still critical to generating sales,” said the BRC’s director general Helen Dickinson.
But April was not all bad, she stressed, noting that for non-food sales it was better than March once the Easter distortion was taken away.
“Wintry weather, followed by the arrival of sun, had a big influence on some retailers,” she said. “Fashion sales were weak early in the month but that was almost entirely made up later when signs of spring arrived. While health and beauty gained both ways with strong sales of cold and flu remedies and then of bronzing and skin care products.”
The ‘Branomics Bra’ is a playful take on prime minister Shinzo Abe’s ‘three-arrow’ economic revival plan
The Japanese division of lingerie maker Triumph International unveiled on Wednesday an “Abenomics” bra, a special edition it says offers a “growth strategy” and a potential lift towards Japan’s elusive inflation target.
Launches of Triumph’s concept bras in Tokyo have become a regular event over the past quarter of a century and are an important publicity tool for the 127-year-old, Swiss-headquartered company.
The latest “Branomics Bra” follows earlier solar-powered, recycled and “husband-hunting” models but, like its predecessors, will not go on sale.
The “Branomics Bra” is a playful take on prime minister Shinzo Abe’s “three-arrow” economic revival plan that combines monetary strategy aiming to reach 2% inflation in two years and pro-growth reforms.
It features a rising trendline and arrows as motifs and promises a 2% increase in volume with extra padding.
“We hope that, as the Japanese economy grows, we can also help bust sizes to get bigger,” said Triumph spokeswoman Keiko Masuda.
Its benefits for Japan’s policymakers were less clear.