Wednesday 23/01/19

  1. In MACROECONOMIC NEWS, UK pay growth rises as employment levels reach record highs
  2. In TECH NEWS, Dyson moves HQ to Singapore and Foxconn mulls a move to India
  3. In UK RETAIL NEWS, I highlight the flaws in the data, Patisserie Valerie goes bust and Dixons Carphone puts hope in a new gimmick to attract customers
  4. In OTHER NEWS, I bring you optimal ways to defrost your windscreen. For more details, read on…



So UK pay growth and employment are looking good…

UK pay growth surges as employment levels reach record high (The Guardian, Phillip Inman) cites the latest figures from the Office for National Statistics which show that average weekly earnings excluding bonuses rose by 3.3% – the biggest rise since 2008 – and ahead of inflation which currently runs at 2.3%. Figures also showed that the employment rate – expressed as a percentage of working age people with a job – went up to 75.8%, up from 75.3% a

year earlier. Interestingly, director of the Jobs Economist consultancy John Philpott observed that self-employed people accounted for two-thirds of the latest rise in employment suggesting that there was “an element of caution on the part of some employers in the face of prolonged Brexit uncertainty who may for the time being prefer to hire self-employed contractors rather than employees”. I thought that Jeremy Thomson-Cook, chief economist at currency dealer WorldFirst made a very valid point when he said that “employment in itself is a lagging indicator. It is slow to react to positive or negative changes in the economic cycle so, although these numbers are ostensibly for what happened in November, they are more a representation of what happened in the summer”.



Dyson decides to b*gger off and Foxconn considers a move to India…

Billionaire Dyson exports headquarters to Singapore (Daily Telegraph, Alan Tovey) is a major story doing the rounds today as arch-Brexiteer Sir James Dyson has decided to move his corporate HQ. He insisted it had nothing to do with Brexit and his minions have been playing it down (I am sure some corporate PR company is behind this!) as chief exec Jim Rowan said that “we have been investing in Singapore for many years and we want to take advantage of the opportunities presented in south east Asian markets”. This news was announced alongside its annual results which showed sales and profits up by 28% and 33% respectively. Dyson products are now made in south-east Asia, but its main engineering base remains in Malmesbury, Wiltshire. * SO WHAT? * Dyson’s actions would appear to be the height of hypocrisy given his very vocal support for Brexit – at least another vocal supporter, Wetherspoon chairman Tim Martin is actually practicing what he preaches. However, it seems to me that the guy is a great engineer and pioneer and he’s moving his business closer to a much bigger – and growing – customer base as middle classes who value the brand highly are growing rapidly in the region. Dyson’s not a saint – he’s an old man moving his business closer to where the action is. Cold though this sounds, if his company continues to smash expectations – and especially if he manages to come up with properly ground-breaking battery technology – I am sure this will all be forgotten.

Foxconn looks beyond China to India for iPhone assembly (Wall Street Journal, Yang Jie, Yoko Kubota, Newley Purnell and Rajesh Roy) shows what could be the future

for Apple as its main iPhone assembler, Foxconn Technology Group (formerly known as Hon Hai Precision Industry), is looking at producing devices in India. Sources say that senior execs are planning to visit India after Chinese New Year to discuss plans. Neither side gave official comment on this rumour. * SO WHAT? * If a shift to India goes ahead, this could be absolutely MASSIVE news. Current trade tensions between the US and China have highlighted Apple’s vulnerability in particular to China as most of its iPhones are assembled there. One of Apple’s other contractors, Wistron Corp, began assembling the “cheap” SE model in India in 2017, but it has moved on to assembling the 6s there as well – so Apple does have some form. IMHO, Apple should ditch China (well not completely, they might as well have some presence there) and throw its might into India. I think that Apple will be on to a whipping if it just leaves things as they are because a) it is a convenient and high-profile political football and b) there are just too many low-cost local rivals that will obviously get preferential treatment from the Chinese government. India ALSO represents huge growth potential, but the main problem so far has been the prohibitively expensive handset costs as far as locals are concerned. I have said before that if Apple can manufacture in India and export to the world – as it has been doing in China – it could still keep high prices everywhere else and use that margin to balance out the lower margins (but substantially higher volumes) in India. Another angle could be that Apple is stoking this story in the background as a veiled threat to China – but TBH Apple is diddly over there and Xi Jinping probably doesn’t care that much. It’ll probably be a minor inconvenience and one less lever available to him to control the economy.



We see that retail sales figures aren’t always what they appear to be, that Patisserie Valerie has thrown the towel in and that Dixons Carphone is resorting to gimmicks…

‘Flawed’ retail data hits assessment of UK economic strength (Financial Times, Jonathan Eley and Gavin Jackson) is a really good article that highlights the strengths and weaknesses of the various data series pertaining to the retail sector. Just by way of example, figures published by the British Retail Consortium (BRC), the retail industry’s lobby group, says that UK retail sales in December were the weakest in a decade, but then the Office for National Statistics (ONS) said that they were, in fact, up by 2.7% over the same period. The main thing to remember here is that each data series has its flaws. The BRC’s figures are generally considered to be good on food retailers’ sales (because most of the sales are still made in shops and therefore a bit easier to track), but weaker on online (did you know that Amazon does not supply its figures to the BRC?) and non-food sales. They are also skewed more by companies like Debenhams, House of Fraser and New Look – and so paint more of a dire picture of the overall environment. The ONS monthly survey is mandatory and involves 4,000 small businesses and 5,000 shopping chains – whereas the BRC sample is only 95. ONS figures are seasonally adjusted to take things like Easter and Christmas into account, but the BRC’s don’t – which means that their data is likely to be more volatile. Footfall data from Springboard measures shopper traffic, but doesn’t cover online sales and can’t distinguish whether shoppers are spending or just having a look (to later buy online, perhaps?). Then you have Barclaycard and Visa estimates of consumer spending amongst other data

series. * SO WHAT? * Consumer spending in the UK plays a MASSIVE role in the economy and so decent stats are particularly important. The above just goes to show how inexact a science the collection of accurate data really is – and so many people will favour the ONS stats or a combination of different data series. My own preference would be for a mix of ONS with Barclaycard and Visa data because their samples are bigger and they don’t have an axe to grind.

Talking about flawed data, Patisserie Valerie goes bust as rescue talks fail (The Times, Tabby Kinder) brings a sorry saga to a predictable end putting over 3,000 jobs at risk after an alleged £40m fraud left it unable to pay back its massive overdrafts. The company, which was valued at £511m at its peak in June, started on its journey to becoming terminal when parent company Patisserie Holdings found a £40m hole in its accounts. KPMG has been appointed as administrator and it will try to sell the business as a going concern. Some 70 of the 200 cafes and restaurants will shut immediately and Luke Johnson, its exec chairman, will lend £3m to the business to make sure wages for January are paid to all staff.

Dixons Carphone looks to gamers as phone sales slide (Daily Telegraph, Charlie Taylor-Kroll) heralds a new sales gimmick by the mobile phone retailer that has continued to struggle with the lengthening handset replacement cycle. CEO Alex Baldock said that the retailer is going to roll out 140 gaming “arenas” in its stores by the end of the year which will invite gamers to compete against each other in store. * SO WHAT? * Sounds like an expensive pile of sh!te to me. I would argue that the sorts of people that this will attract won’t necessarily be ones who have loads of money to spend on electronic gadgetry and phones and it could turn the shops into virtual arcades with non-buying clientele clogging up the aisles and potentially putting off those who actually want to purchase something. Good luck with that.



And finally, in other news…

I thought I leave you today with some practical tips for the current chilly weather we’re having in How to stop your windscreen freezing and defrost your car – and deter opportunist thieves (The Mirror, Jo-Anne Rowney and Joshua Barrie

Some of today’s market, commodity & currency moves (as at 0818rs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq *DAX *CAC-40 *Nikkei **Shanghai **
6,901 (-0.99%)24,404 (-1.22%)2,633 (-1.42%)7,02011,090 (-0.41%)4,848 (-0.42%)20,594 (-0.14%)2,581 (+0.05%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)