Good morning,

We’ve not been getting caught up in the data of late, with so many larger events taking place, but one area that caught our attention was consumer spending data from January.  Usually these numbers are delayed by about a month, but the ONS are trying to provide more real time analysis and what they’ve come up with tells us that spending in this lockdown is about 35% lower than it is in normal times and about 12% lower than it was during the November lockdown.  That probably won’t be news to anyone working in retail, but what it does show is that the resilience the consumer has displayed until now is waning, despite there being more general activity out and about than there was during lockdown one.

Another issue that consumers and retailers are facing is the increased cost of selling and buying  goods to and from overseas.  Since January 1st, more and more people have ordered a product online only to find a customs charge needs to be paid ahead of receiving the goods. The Times is reporting that tens of thousands of UK customers have faced customs charges of almost a third of the value of the original order and haven’t been warned during the checkout process that this might be the case. This is leading to a lot of deliveries being rejected and the same applies to goods sent from the UK to Europe, so much so that the BBC report retailers are now stockpiling returned goods across the channel, because it would cost them even more money to bring them back into the UK – to the point that it would be cheaper to burn the goods, rather than pay the fees and re-stock them for future sale. The government advice on the issue has been to open up a European distribution facility, which seems entirely unhelpful. Perhaps this will be ironed out over time, but the last thing most businsses need are disincentivised consumers, cashflow issues and even more stock write-offs.

Of course, the faster the vaccination programme goes, the quicker we can get back out there and spend in store, but the government is coming under pressure to reverse its decision to extend the gap between dose one and two from three weeks to twelve, which might have an impact on just how quickly we can get back. Following data from Israel showing that the first shot alone isn’t as effective as thought, as well as infection outbreaks in care homes where people have received the first dose, Boris and co. are being urged to rethink the plan. It will be a difficult decision to take, but having to double up on doses when supplies are constrained is going to push the timeline back.  Despite Gavin Williamson’s lack of a comprehensive answer yesterday, it’s becoming clear that schools won’t be back before Easter and now there is conversation of hospitality staying closed until May, as a re-opening would almost certainly lead to a spike in transmissions. Boris Johnson is reportedly now urging Rishi Sunak to extend the universal credit, which is due to expire in March. This comes just days after Labour tried to get a non-binding majority vote on the subject, but failed because only six conservative MP’s were willing to cross the aisle and vote with Labour – for the last four years we’ve talked about how frustrating it is seeing US lawmakers choose party allegiance over common sense, but it seems we too are suffering the same fate.

Over in the US:  President Biden will be speaking on the economy today and it’s got the potential to be a real market mover.  He’s taking the Friday afternoon slot, which means that the US will be the only market open and as such anything significant is going to hit a pretty illiquid market.  Yesterday we saw some responses from Janet Yellen to additional questions raised in the process of her confirmation as treasury secretary, and she’s in broad agreement with the president that corporate tax rates need to be raised in the US, as well as other measures implemented to reduce tax avoidance.  Ms Yellen also thinks a mandated $15 per hour minimum wage would have a minimal impact on jobs, which makes it all the more likely it will be introduced, despite plenty of protest from industry bodies.  We’re not sure he’s going to be too progressive too quickly and given his few speeches so far have been very well measured, our thoughts are that he’ll put corporate America on notice that change is afoot, but whilst the immediate backdrop is what it is, the government has got their backs – and if that happens we’d expect yet another record close on Wall Street (despite the underlying realities of the economy!)

Be well.