Monday 21/06/21

1. In MACRO & CRYPTO NEWS, UK inflation concerns grow, UK output increases and China cracks down again on Bitcoin
2. In CONSUMER TRENDS NEWS, timber prices fall and UK house prices lost momentum
3. In EMPLOYMENT NEWS, McDonalds announces a UK hiring push, UK cannabis production slows because of labour shortages, Deutsche wants juniors in the office and qualified lawyers are lured by US firms with big money
4. In MISCELLANEOUS NEWS, American Airlines cuts flights, EV start-ups weather bad turbulence and Morrisons gets an unsolicited offer
5. AND FINALLY, I bring you Japan’s curry university and Honda’s navigation shoes…

So UK inflation concerns grow, UK output rises and China comes down again on Bitcoin…

Inflation fears grow as prices rise the fastest in two decades (The Times, Philip Aldrick) cites a survey from Lloyds Bank which shows that businesses in all 14 sectors of the economy are raising prices at the sharpest rate for 22 years. It’s especially impressive for the manufacturing sector, which is seeing the fastest rate of price rises in 29 years. Manufacturers of chemicals, metals and mining products raised their prices the most. * SO WHAT? * This just goes to show that businesses are getting increasingly confident about passing on input price rises to the end consumer. However, this will put even more pressure on the Bank of England to take action (increase interest rates) to calm inflation before it really starts to get out of hand. Its Monetary Policy Committee is due to announce its interest rate decision this Thursday and analysts expect it to remain unchanged at 0.1% despite the announcement last week of an official inflation rate of 2.1% – which is slightly above the Bank of England’s 2% target.

Output grows as recreation and tourism firms reopen (The Guardian, Graeme Wearden) cites the same survey but concentrates more on what it said about output – and it says that 11 out of 15 sectors posted faster output growth

month-on-month in May versus 9 in the previous month. It found that tourism and recreation experienced the biggest output growth as consumers flocked to British hotels, pubs and restaurants as restrictions eased. * SO WHAT? * On the one hand, the delay of the original “Freedom Day” from June 21st to July 19th could add to that pent-up consumer feeling, potentially prolonging the rise in spending and prices – but then again it could also be a month too far for many businesses that have just been hanging on. It’s all going in a positive direction at the moment but if there is another delay to July 19th I think there would be massive uproar from the business community.

Then in China steps up crackdown on bitcoin mining industry (Financial Times, Christian Shepherd) we see that China’s biggest Bitcoin producing provinces are continuing their crackdown on Bitcoin mining as officials followed the example of Inner Mongolia and announced additional measures to target such operations. Inner Mongolia has banned mining and set up a telephone hotline where people can report on suspected operations. Sichuan has stopped the largest 26 local mines while it conducts an investigation that will go on until June 25th. * SO WHAT? * This is pretty devastating for those involved in a country that used to be a hotbed of cryptocurrency trading and mining. Will other countries start to clamp down in the same way? If they do, this could be pretty bad for cryptocurrencies, especially the lesser-known ones. It could pave the way to “official” cryptocurrencies, though…

Timber prices drop and UK house price rises slow down…

It’s interesting to see Timber prices fall as US consumers swap DIY for going out (Financial Times, Harry Dempsey) as US consumers are now abandoning their DIY projects and going out to eat, drink and shop as Covid restrictions continue to ease. Prices of wood have dropped sharply from their recent highs – by a whopping 48% since the highs of early May – reflecting a bigger-than-expected fall in renovation activity OR it could be that people saw the prices of lumber and went out to get a stiff drink instead, opting to pause projects until prices came back down again! * SO WHAT? * This will boost the argument of those who believe that inflation is just transitory but then again wood prices are still way above the previous record high of 2018 and triple the historical price average. Prices may also be supported by stronger for longer demand as housebuilding picks up across the board and supply constraints including labour shortages and a mountain pine beetle epidemic in British Columbia. 

Wales puts wind into house prices as rate cools (The Times, Gurpreet Narwan) cites Rightmove’s latest report which shows that house price rises are losing their momentum as they rose by “just” 0.8% in May versus a chunkier 1.8% in the previous month. Having said that, it was still the strongest June since 2015. Rightmove uses asking prices for its calculations and claims that it covers 95% of properties on the market. Buyer demand remains high and the trend for moving out of city centres continues as we head towards the end of the stamp duty holiday. Wales has been a major beneficiary of all the kerfuffle as prices there have risen by 14.6% since March 2020. * SO WHAT? * As I keep saying it will be interesting to see whether the UK housing market takes a bit of a breather in August/September as the end of furlough and the stamp duty holiday loom larger. Buying activity slowed down significantly ahead of the original deadline earlier this year but I guess circumstances are different now as economic activity and confidence levels are much higher. Whether they will be enough to absorb the double-blows is something we will just have to wait to see.

We look at job trends in McDonald’s, cannabis production, investment banking and law…

There were some interesting updates on the employment front today! McDonald’s to hire 20,000 staff as part of UK and Ireland expansion (Financial Times, Judith Evans) shows that McDonald’s is making a big investment push as it plans to open over 50 new restaurants over the coming year. It already operates 1,300 restaurants in the UK and Ireland under a franchise system and employs 120,000 workers. * SO WHAT? * Fast food continues to be popular (as we’ve found from Domino’s recently announcing a hiring spree) and well-funded companies are clearly trying to use a gappy high street and hamstrung landlords to hammer out the best deals they can in order to expand their respective footprints.

Post-Brexit labour shortages deal blow to UK cannabis production (Financial Times, Robert Wright and Judith Evans) shows that the company that owns the UK’s biggest production site for use in pharmaceuticals, British Sugar, is adding to calls from the leisure, agriculture and hospitality sectors for a change in immigration policy due to the sudden shortage of European workers following Brexit. The agriculture director for British Sugar, the fantastically-named Peter Watson (no, I’m not doing this as a sideline and no, he is not a relative 😂), has highlighted recruitment problems due to the restrictions imposed by the seasonal agricultural workers’ scheme. British Sugar supplies the US company Jazz Pharmaceuticals with ingredients for its anti-epilepsy drugs.

Then Deutsche UK boss wants banking graduates back in the office full-time (Daily Telegraph, Hannah Boland) shows that juniors at Deutsche Bank’s UK investment banking arm will have to go back to the office full-time Monday to Friday once lockdown restrictions are lifted fully as its chief exec believes they benefit most by being there. Other employees are supposedly going to be allowed to work up to three days a week from home, but I suspect that older colleagues will be encouraged to be in the office more as well. Meanwhile, Junior lawyers lured away from Britain with offer of £140,000 pay packets in the US (Daily Telegraph, Tim Wallace) shows that law firms are trying to attract young lawyers from British firms by offering them starting salaries for newly-qualified lawyers of up to £140,000. Such tactics have forced “magic circle” firms to increase their own offers to head off any kind of brain drain. * SO WHAT? * There are shortages at the moment across swathes of professional services like lawyers, accountants, auditors, tax experts and IT but I would advise anyone considering a move for money to think very hard about what they are getting themselves into and EXACTLY what will be expected of them when they move. Some firms are notorious for their big hours culture and if they are paying more, I would think that they are going to expect more as well…

American Airlines actually cuts flights, EV start-ups roll with the punches and there could be a bidding war for Morrisons…

In a quick scoot around some of the other big stories today, I thought I’d mention American Airlines cuts some flights to avoid potential strains (Wall Street Journal, Alison Sider) because the airline is actually cutting the number of flights it offers (don’t worry – it’s only about 1% of them at the moment) due to the shock of the sudden upswing in demand putting a strain on its operations. * SO WHAT? * Travel demand has recovered way more quickly in the US than anticipated, meaning that many of the services that are normally provided are short-staffed. It’ll be interesting to see whether Europe experiences the same thing.

I’d recommend that you read EV startups are in trouble. Investors don’t care (Wall Street Journal, Eliot Brown) in full if you can because it is a really interesting article which makes the very valid point that although companies like Lordstown Motors and Nikola have basically announced that they’ve lied to investors, their share prices have actually proved to be remarkably resilient considering!

Electric car maker Canoo has also recently abandoned various parts of the business plan that it used to attract investors to its IPO. * SO WHAT? * Given the disastrous news that each of these companies has articulated, you would have thought that their respective share prices would have tanked. OK, so they are off their highs, but they haven’t yet disappeared and there is speculation as to the role that retail investors may or may not have in keeping these businesses alive by buying into their shares. It just goes to show that when hype is attractive enough, it can sometimes overwhelm substance!

Then in Clayton, Dubilier & Rice set to continue pursuit of Morrisons (Financial Times, Jonathan Eley) we see that the US private equity firm got its unsolicited bid to buy Morrisons rejected over the weekend. They’ve now got until July 17th to make another offer and Deep-pocketed bidders set sights on Morrisons (The Times, Ashley Armstrong) does a good breakdown of the current situation for the UK’s 4th biggest supermarket. Morrison’s current CEO and CFO are ex-Tesco long-timers and the guy leading the CD&R bid is Sir Terry Leahy, the former Tesco boss. * SO WHAT? * No doubt CD&R will be interested to see what the reaction is to this bid, but I must say that given Amazon’s interest and partnership with Morrison’s, surely it might be inclined to put in a cheeky offer, no?

…in other news…

I thought I’d leave you with the very specialist institution in Can you handle the heat? Japan’s one and only Curry College now enrolling new students (SoraNews24, Ingrid Tsai). If you’re interested in applying, you’ve got until July 31st! Then there’s the interesting gadget in Honda has created a GPS navigation system for your shoes (SoraNews24, Casey Baseel). Kind of useful, but rather unsightly IMO 😂.