Tuesday 17/01/23

1. In MACRO & HOUSEHOLD ENERGY NEWS, China’s GDP weakens and its population shrinks, Yellen plans an African trip, Turkey tries to reassure NATO, UK inflation could drop sharply (but it’s already taken its toll) and British Gas goes on the heat pump offensive
2. In TECH NEWS, Microsoft considers a $10bn bet on AI, Didi benefits from the thaw and TikTok looks to rejig its US business
3. In CONSUMER TRENDS & RETAIL NEWS, US companies are slowing price hikes, EVs now make up 10% of new car sales, Fortum’s returns to profit and Reiss spruces up nicely
4. In REAL ESTATE NEWS, Russians buy Dubai, buyers still pay for eco-offices and the old John Lewis in Birmingham gets a new lease of life
5. AND FINALLY, I bring you a very small “apartment” and a loveable pet duck…

So China growth slows, Yellen plans for Africa, Turkey drags its feet, UK inflation could go lower – but has already taken its toll – and British Gas gets into a price war…

📢 I’ll shortly be publishing my annual P/Review where I roundup the news of the year in 2022 and then outline predictions for themes in 2023. Because it’s such a big report 😱, I will be publishing it in stages. There is nothing like this anywhere else, and it will help your understanding of what’s going on enormously so keep an eye out for it! In the meantime, I’ve recorded a special podcast where Ralph Hebgen and I talk through some key themes to watch out for this year. You can listen to it HERE or watch it HERE.

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

China’s economic growth fell to near-historic lows as Covid took a bite (Wall Street Journal, Jason Douglas) cites the National Bureau of Statistics’ latest release which said that China’s GDP growth slowed right down from 8.1% in 2021 to 3% in 2022 as the lockdowns took their toll. 2022’s GDP growth figure was China’s second worst performance since 1976 – only better than the 2.2% growth of 2020 when we were all knee-deep in Covid. China’s population declined in 2022 for first time in decades (Wall Street Journal, Liyan Qi) was another interesting release, highlighting the culmination of years of falling birth rates. This was China’s first population decline since the early 1960s which came in the wake of the famine that followed Mao Zedong’s “Great Leap Forward”. It now looks like India could be the world’s most populous country! * SO WHAT? * China certainly seems to be showing early signs of recovery after a highly-disrupted year, but it is now emerging into a world where recession is an increasing threat, which means that demand for its exports may not be what they once were. On the domestic front, consumer confidence is not in a good place currently and might take some time to recover.

Janet Yellen to visit African countries as US steps up overtures to continent (Financial Times, Joseph Cotterill, David Pilling and James Politi) shows that US Treasury secretary Janet Yellen is going to be doing a tour of Senegal, Zambia and South Africa in an attempt to curry favour with a continent that has thus far had more input in terms of finances and resources from China and Russia. The US has been talking about investments in infrastructure, metals for EV batteries and renewables. * SO WHAT? * I think she’s going to face an uphill struggle as China has been a major influence on the continent for a very long time, whereas Yellen and the Biden administration are playing catch-up. For instance, Qin Gang, China’s foreign minister, has already visited the continent – the 33rd consecutive year that it has been a Chinese foreign minister’s first foreign visit! When you consider that by 2050, 25% of the world’s population will be African and at least a third of minerals needed for the transition to a sustainable future will be mined there, you can see why the US is making a belated attempt to become BFFs.

Meanwhile, Turkey seeks to reassure allies on Nato enlargement (Financial Times, Ayla Jean Yackley) highlights Turkey’s latest sabre-rattling as its country’s defence minister called on NATO-wannabes Sweden and Finland to do more to settle their bid to join NATO, following the frustration expressed by Sweden’s PM last week. The drama continues…

Nearer home, Inflation could fall rapidly as energy costs drop, says Bailey (The Guardian, Richard Partington) cites the governor of the Bank of England as saying that inflation could drop sharply due to the fall in energy prices over recent weeks. However, Inflation fuels 46% rise in businesses going bust (The Times, Helen Cahill) – which cites research by Interpath, showing that retail and casual dining were hardest hit – and Inflation wipes out pandemic savings of six in 10 households (Daily Telegraph, Jack Ryan), show that inflation has already been taking its toll! Findings from the Centre for Economics and Business Research (CEBR) showed that 60% of households have already spent all their savings to “maintain their lifestyle”. I don’t think we’re at the end of the tunnel yet!

Then in British Gas starts price war with Octopus over heat pumps (Daily Telegraph, Rachel Millard) we see that Britain’s biggest household energy supplier said it will now price match any offer by a rival company for accredited installations of heat pumps as the race to replace gas boilers heats up. Heat pumps suck in warmth from the outside air and use electricity rather than gas and are therefore deemed to be more eco-friendly. * SO WHAT? * At the moment, prices for heat pumps are high so a bit of healthy competition could be good for consumers, especially as the government’s Boiler Upgrade Scheme gives grants of £5-6,000 towards different types of heat pump. It sounds like we are at pretty early stages at the moment though…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Microsoft eyes an investment in AI, Didi sparks into life and TikTok considers change in the US…

Microsoft’s $10bn bet on Chat GPT developer marks new era of AI (Financial Times, Richard Waters and Tabby Kinder) shows that its potential big bet on San Fran research group OpenAI could be a major step for the company in a new era of artificial intelligence. OpenAI grabbed global attention last month with the launch of ChatGPT, an AI system that is able to answer questions and produce text in a very natural-sounding way. * SO WHAT? * Microsoft reckons that this could revolutionise the way humans interact with computers and its rumoured potential investment could give OpenAI an implied valuation of $29bn. Microsoft made its first $1bn investment in the company in 2019. It is worth noting that some of Microsoft’s biggest rivals in cloud computing have been looking to link-up with other AI companies although OpenAI appears to be at the cutting-edge currently in terms of scale and range. Amazon has a three-year deal with Stability AI and Google has links with Cohere AI, which was founded by three of its researchers. Given the money needed to accelerate development in AI, you would have thought that big company links will continue as they have the resources needed.

Didi resumes new customer sign-ups as China eases tech crackdown (Financial Times, Eleanor Olcott and Ryan McMorrow) shows that Chinese authorities have given ride-hailing group Didi

permission to bring on new customers again after an investigation meant its app was forced to go offline. * SO WHAT? * This action makes it look like Chinese authorities are easing off the clampdown that’s been going on for a while now. Tencent experienced similar relaxation recently so maybe the country’s tech companies will be allowed to grow again. Given how much China’s economy has suffered over the last year especially, the country needs all the growth it can get!

Then in TikTok tries to win allies in the US with more transparency (Wall Street Journal, Georgia Wells and Stu Woo) we see that TikTok is set to reorganise its US operations with a $1.5bn plan as it continues to negotiate with the Committee on Foreign Investments in the US (aka “Cfius”). The pressure is on the short-form video app as officials and lawmakers are increasing calls for a ban on government-issued devices and even a ban on the app altogether in the US due to concerns that Beijing could access user data. * SO WHAT? * TikTok doesn’t usually give details on things like reorganisation or algorithm changes, but in a bid to be more transparent it is trying to work in oversight to convince the Americans that everything is above-board. If TikTok doesn’t satisfy US officials, it is possible that the government could force parent ByteDance to sell parts of its US operations or kick it out of the US altogether! No doubt Meta will be praying for that 🤣!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Price rises slow down, EV sales reach a new level and UK retailers continue to show resilience…

Shopper rebellion against higher prices helps slow inflation (Wall Street Journal, Sarah Nassauer, Suzanne Kapner and Nick Timiraos) shows that some companies are pulling back on price rises as consumers are getting increasingly unwilling to pay. Conagra Brands, which makes Hunt’s ketchup and Slim Jim meat sticks and restaurant chain Hurricane Grill & Wings are among those to stop charging customers more after putting hefty price rises through last year. Constellation Brands, which owns the Corona beer brand, says it plans smaller price increases after price rises put through at the end of last year stunted sales. * SO WHAT? * A lot of price rises were put through because of higher labour and materials costs – but some of the rise was down to companies anticipating further price rises as well. Now that consumers are REALLY being squeezed, increasing numbers of them are drawing a line and now companies are having to be more careful about what they do from now on otherwise sales will slide. This is happening in the US at the moment, but I would have thought that everywhere else will feel this to some extent sooner or later because you can’t keep rising prices forever!

EVs made up 10% of all new cars sold last year (Wall Street Journal, William Boston) signifies a new milestone for global car sales – that last year they hit around 10% market share for the first time ever! This was down to strong growth in China and Europe while global sales of fully electric vehicles increased by up to 68% versus the previous year. For the full year, 100% EVs accounted for 11% of total car sales in Europe and 19% in China, according to figures from LMC Automotive. If you included hybrid sales as well, the share of EVs sold in Europe is 20.3% of total sales, according to EV-Volumes.com. At the moment, in the US, EVs account for 5.8%

of all vehicle sales versus 3.2% the previous year – so lower than Europe or China but heading upwards. In Germany, though, there were more EVs sold than conventional cars in December! * SO WHAT? * This all sounds like good news, but I maintain that one of the biggest problems facing the industry is the lack of battery raw materials. If sales continue to accelerate at a rapid clip, we just won’t be able to keep up and prices will go sky-high. Investment needs to continue into the use of other sources of power and the diversification of mining and refining capacity IMO.

It seems that the resilience of UK retailers is continuing in Fortnum & Mason back in profit as customers return to stores (Financial Times, Arjun Neil Alim) as the luxury food retailer managed to return to profit last year as shoppers flocked back to the high street and online sales increased. The company said that online sales accounted for 40% of revenues while footfall in its stores increased by 48% in the five weeks to Christmas Day versus the same period in 2019. * SO WHAT? * They weren’t immune to the effects of higher prices and although things could get tricky over the next few months, Fortnum’s is hoping that it can benefit from the King’s coronation this year and a related range of products. Interestingly, the company says that it is going to make more effort to be relevant to the domestic market as an alternative to, say Waitrose or Wholefoods.

Then in Store sales give Reiss a festive flush (The Times, Isabella Fish) we see that Reiss, which is majority owned by Next, was the latest retailer to report a strong performance over the Christmas period and says that current trading is also looking pretty robust. Next owns 51% of Reiss, having doubled its stake in the business last year. * SO WHAT? * It seems that the whole trend of youth buying clothes through the cost-of-living crisis really is true! The other things that may have helped are the increasing return to office, which has required smarter clothes, and more going out.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Russians buy into Dubai, eco-offices prove popular and there’s a new use for the old John Lewis store in Birmingham…

In a quick scoot around some of today’s other interesting stories, Russians buy up property in Dubai (Daily Telegraph, Matt Oliver) highlighted the phenomenon of Russians becoming the biggest foreign buyers of property in Dubai in the wake of the Ukraine war as the west imposed increasingly large sanctions on super-rich Russians. Property broker Betterhomes said that Russians are now the biggest group of non-resident buyers, accounting for 15% of their transactions with Brits accounting for 12%, Indians 11%, Italians 7% and French 4%. I don’t find this surprising at all!

Then in Buyers pay more for eco-friendly offices (The Times, Tom Howard) we see that eco-friendly offices are attracting much higher capital values and rents, according to property agent JLL. Interestingly, it said that offices with better sustainability attracted a 20.6% premium compared to those that didn’t. * SO WHAT? * This just goes to confirm that there is an widening divergence in the office market with eco-friendly buildings enjoying strong

demand while older building seeing demand wane. The key seems to be whoever has the higher Breeam rating wins (BREEAM stands for Building Research Establishment Environmental Assessment Method) because they are deemed to be “less risky” and less likely to have to have costly upgrades.

There’s some good news in Landlord hits on new use for John Lewis (The Times, Tom Howard) as the old John Lewis store in Birmingham’s Grand Central shopping centre that has been empty for almost three years. Shopping centre owner Hammerson brought in Make Architects, who helped design London’s Gherkin, and if planning permission is given it could become a very cool office with leisure and retail facilities called “Drum”, on account of its shape. If all goes to plan, work could start at the end of this year and tenants could start in 2025! * SO WHAT? * I think that it’s important that landlords and councils get creative about the big spaces that have been left in town centres by department stores sooner rather than later to stop these areas sliding into oblivion. This sounds like a good example of a project that is on a grand scale, but more of this needs to be done around the country IMO to keep town centres buzzing.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

With real estate prices staying strong, finding a bargain is continuing to be difficult. Would you draw the line, though, at this “bargain” Tiny flat up for rent is so small you can cook and use TOILET at same time (The Mirror, Simona Kitanovska and Susie Beever)?? One of the many downsides in living in a place as small as that is that you couldn’t have a pet like this: Pet duck that drinks tea, chases binmen and walks to shops wins fans across world (The Mirror, Stephen White). Ahhh 😍!