This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week.
THE DAY IN BRACKETS REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.
IN BIG PICTURE NEWS...
- The US is doing another stimulus (Weds) – this time US House of Representatives has approved an outline for Joe Biden’s massive $3.5tn domestic spending package, the detail of which is to be fleshed out later this year. It follows the $1.9tn stimulus package he signed in March and is a major part of his greater economic plan.
- IN ASIA – South Korea raised interest rates 0.5% to 0.75% (Thursday) in a bid to rein in record household debt and red-hot property prices. House prices have risen by 14.3% between July last year and this year – the steepest rise since 2002 – and household debt increased by 10.3% in Q2 versus the previous year.
- IN EUROPE, German business confidence continues to waver (Thursday) the latest closely-watched Ifo survey reflects a major drop in business expectations in August in Europe’s biggest economy.
- IN THE UK – Confidence in the UK’s service economy was also hit (Thursday) according to the latest CBI survey which voices concerns about the ongoing impact of supply shortages and rising costs. ALSO IN THE UK, HS2 looks like it’s getting scaled back (Thursday) as the government looks for ways to rein in costs and Wales looks at putting Small Modular Reactors in existing nuke sites (Thursday). It was interesting to see signs of recovery such as City Airport expects biz travel to return next year (Tuesday) and footfall is rising in the West End (Tuesday).
- Elsewhere, South Africa jobless rate hits 34.4% (Wednesday) as the headline unemployment rate rose from 32.6% in Q1 to 34.4% in Q2 as businesses cut staff due to the economic impact of the pandemic
SUPPLY CHAIN ISSUES CONTINUE TO GROW GLOBALLY...
- Coronavirus outbreaks in Vietnam, Indonesia, Sri Lanka and Thailand are causing supply chain problems (Wednesday) that are having global repercussions. Such countries have had low vaccination rates and are now suffering particularly badly with the advent of the Delta variant. Western brands such as Adidas and Crocs rely heavily on Vietnamese manufacturing and are currently paying for expensive air freight to keep product flow going and make up for production delays. Fun facts: Vietnam produces over 30% of American shoe imports and it is the #2 supplier of shoes and apparel to the US after only China. Some American companies, including Nike and Gap, have written to Biden asking him to increase US vaccine donations to the country.
- Industries across the UK are getting hit by supply chain problems (Wednesday) as restaurants, pubs, wholesalers, construction firms and farmers are all showing increasing signs of strain. McDonald’s cut milkshakes and bottled drinks, Nando’s closed 45 stores due to a lack of chicken and Greene King and City Pub Group have run out of certain drinks. A monthly CBI survey yesterday showed that the UK retail sector is now at an undersupply level of -21% this month – its lowest on record 😱. The Recruitment and Employment Confederation, which represents UK recruiters, says that staff shortages are going to continue to put pressure on supply chains – and it’s likely that this could affect Christmas. The CBI weighed in on giving workers in specific sectors temporary visas to ease supply chain problems (Thursday). As the MD of Iceland put it, “We’ve already had one Christmas cancelled at the last minute, and I’d hate this one to be problematic as well”. Things are getting so bad in the food processing industry that the Association of Independent Meat Suppliers – which is the industry body representing butchers, abattoirs and processors –set up a call with the Ministry of Justice earlier this week to talk about how its members could recruit more current prisoners and ex-offenders. So far ministers are holding firm on issuing temporary visas (Monday), but surely they will have to relent.
- Executives highlight ongoing trickiness with regard to the availability not only of containers – but also of the ships that carry them (Monday) and even the reopening of the world’s 3rd busiest port in Ningbo, China won’t make a difference for weeks or months (Thursday).
RETAIL CONTINUES ITS MOMENTUM...
- IN THE UK – the CBI’s latest stats show that retail sales rose this month at their fastest pace in almost seven years (Wednesday), with a net 60% of retailers reporting higher sales in the year to August – the highest level since December 2014 BUT this was at higher prices as a net balance of 73% of retailers reported higher prices versus the same month last year.
- Also, M&S’ share price hit its highest level since the pandemic started (Wednesday) and investors felt they had reason to feel more optimistic as the high street stalwart upped its annual profit guidance last week.
A LOT OF COMPANIES ARE DECIDING ON NEW INITIATIVES...
- UK banks have extended their experiment of sharing branches (Tuesday). The pilot scheme involves having multiple banks in one branch but it has proved to be so popular that the original October deadline has been extended.
- British Airways is looking at launching a new low-cost short-haul subsidiary (Friday) from Gatwick. It’s done this once before, but it didn’t work. Will it work now when things are even more competitive and they are facing increasing pressure on other long-haul routes (particularly London-New York)?
- Lixil making digital showrooms a permanent feature (Tuesday). Under lockdown, the Japanese building materials and housing fixtures company had to rely on digital showrooms to communicate with customers and it has been decided that this is to continue. I suspect that this will be increasingly popular especially among retailers who sell big products that take up a lot of room, e.g. furniture retailers.
- WeWork is now offering PAYG desks (Wednesday), which I think is a great way to generate some quick cash – but it could also prove to be a novel way of getting new business as it gives potential longer-term customers a “try-before-you-buy” opportunity. On a related note, I also wondered whether private member clubs such as Soho House could be another alternative provider of workspace in a more relaxed environment (Friday). If so, this would provide even more competition for the likes of WeWork and IWG etc.
- Walmart is offering the use of its delivery platform to 3rd parties (Wednesday), which will offer another useful income stream and opportunity to other companies in the highly competitive “last mile” delivery segment.
...AND IN INTERESTING INDIVIDUAL COMPANY NEWS...
- Xiaomi leapfrogs Apple (Tuesday) According to figures from Counterpoint Research, in June, it sold the most phones globally – more than Samsung – and it became the world’s second biggest mobile phone manufacturer in Q2, pushing Apple into the #3 spot. It doubled its market share in Europe to 24% over the last 12 months and became the top seller in Denmark, Belgium, Ukraine and Russia
- OnlyFans had a drama as it initially said that banks were behind its recent announcement to ban explicit content (Wednesday) but then it reversed its decision to continue being a platform for such content (Thursday). This just proves that OnlyFans needs porn more than it does banks!
- FCA gave up on trying to regulate Binance (Thursday) as it said that the cryptocurrency trading platform couldn’t even answer basic questions.
- Didi suspended its UK and European expansion (Tuesday) due to concerns about how it handles passenger data. China’s latest data protection laws force companies to let them access data upon request.
- In the world of fitness, Peloton decided to cut the price of its flagship product – its exercise bike – by $400 (Friday) as sales are slowing – and budget UK gym chain PureGym is preparing for an IPO (Friday) in order to fund overseas expansion.
AND IN UPDATES FOR WATSON'S YEARLY...
- Watson’s Yearly updates: These will be left until the next edition of Watson’s Yearly that will be published shortly
My favourite “alternative” stories this week were the ingenious Man gets QR code tattoo which shows he is coronavirus-free, and uses it at McDonald’s (The Mirror, George Roberts) and the rather sensational Japanese grade students make working game consoles entirely out of cardboard for their summer homework (SoraNews24, Katie Pask). Enjoy!