Most independent observers are much more pessimistic about the prospects for the economy than the Government – not so much for this year but about how quickly the economy will bounce back in 2009.
Few economists, if any, agree with the Treasury's forecast of 2.25 to 2.75 per cent growth for next year. Even the Bank of England admits the clear possibility that the economy will briefly shrink during one quarter, perhaps in 2008, more likely in 2009.
Still, even that isn't a recession on the formal definition – of successive two quarters of negative growth – is it? No, which is just as well for the Government, which habitually stands by it. However, that "definition" isn't set in stone anywhere, and the American National Bureau of Economic Research, which pronounces on these matters in the US, says that "a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales".
Sounds familiar. The UK could easily go from 2.9 per cent growth to 1.75 per cent inside a year – and the G-forces of such a violent deceleration will be felt throughout the economy, but will inflict particular discomfort in certain key areas.
The state of the housing market is the most worrying economic concern, for it is here that all the malign influences converge. The US sub-prime crisis and the continuing credit crunch refuse to go away – indeed they are now feeding on each other in a vicious circle. Truly terrifying numbers have been emerging from the UK's property market lately. It's not so much the gradually declining prices, but the record low numbers of surveyors reporting activity, the trickle of new mortgage approvals and the huge overhang of unsold flats and houses.
Such a depressing backdrop will destroy consumer confidence – already at record lows. And when the spending stops, sooner or later the jobs will start to go – the crucial moment when a downturn slides into a slump.
Nor is that all. This time we have record inflation too. Food prices up 50 per cent in a year; oil at over $100 a barrel; the pound down by 17 per cent on the year. These will all damage household budgets. The spectre of stagflation – stagnating output plus inflation – has returned to haunt the economy. And there isn't a thing Mr Darling can do about it.
Last time we had a downturn – after the dotcom collapse in 2000 and the 9/11 attacks a year later – Gordon Brown turned on the public spending taps to keep the economy going, just as the White House is doing today. All Mr Darling did yesterday was to wave his Budget box as he drowns.
Bad as things are, though, a lot hangs on the labour market. This is probably the key between sharp slowdown and a truly nasty slump. It is the difference between now and the past three British recessions. In the downturns of the mid-1970s, the early 1980s and again, to a lesser extent, the early 1990s the British labour market was too rigid, and that made it difficult for businesses to adjust to straitened circumstances. Trade union power was greater in those days.
But there have been more significant changes than that since then. Today the impact of immigration, of older workers coming back into the labour force, of workers afraid of losing their jobs to competition from China or India or Slovakia under the impact of globalisation have all eroded the bargaining power of labour.
Liberalisation and increased competition in product markets have also fed through into a more easily managed workforce. This means that real wages are more susceptible to downward pressure, which should shield employment and investment during any sustained downturn. That is crucial. And, for all the chatter about rampant cost inflation, wages still comprise some 70 per cent of costs. Keep those under control and even the most hard-pressed company ought to be able to protect itself, and its staff, during this economic storm.
Rising unemployment is usually the trigger for a full blown recession, complete with housing slump and blood all over the high street. So far, the survey evidence suggests that employment is doing OK (actually it's at a 30-year high).
Second, one should add, the errors of the Major-Lamont recession of 1990-92 can't be repeated this time because we are not about to crucify the economy on the altar of trying to retain a fixed exchange rate, as we did then (and, further back, as we did at various points in the "stop-go" 1950s and 1960s).
Today, the Bank of England's Monetary Policy Committee sets rates at a level consistent with the internal conditions of the UK economy. So far, they've done a good job. And a falling pound, as in 1992-95, might now help exports and avoid the worst of the world slowdown.
So, perhaps Mr Darling isn't being entirely Micawberish in his hope that something will turn up to save his chancellorship. Not just that though – 2009 should be an election year, and Mr Brown will have to go to the polls by the summer of 2010 so his party's fortunes are riding on this too.
It's enough to turn your hair white ...
Thursday, March 13, 2008
U.K. Stocks Decline, Led by HSBC, RBS; Wolseley Shares Retreat
U.K. stocks had their biggest drop in one month, led by HSBC Holdings Plc and Royal Bank of Scotland Group Plc.
Wolseley Plc, slumped the most in five years after Goldman, Sachs & Co. and ABN Amro Holding NV advised their clients to sell the stock.
The FTSE 100 Index decreased 108.8, or 1.9 percent, to 5,667.6 at 12:22 p.m. The FTSE All-Share Index lost 1.9 percent, while Ireland's ISEQ Index slid 3.2 percent.
Stocks in Europe and Asia dropped after Carlyle Group's mortgage-bond fund said it will default on its remaining debt and the dollar slumped against the euro and the yen, dimming the earnings outlook for banks and automakers.
HSBC, Europe's biggest bank by market value, retreated 2.6 percent to 774.5 pence. RBS, the U.K.'s second-largest, decreased 4.5 percent to 342.75 pence.
Carlyle's fund, which received more than $400 million in margin calls since March 5, today said it was unable to reach an agreement with lenders. Through March 12, the company has defaulted on about $16.6 billion of debt, and any remaining debt is expected ``soon'' to go into default.
Wolseley, the world's biggest distributor of plumbing and heating equipment, sank 7 percent to 546 pence. It was today's worst-performing stock in the U.K.'s benchmark FTSE 100 Index.
``As construction markets in the U.S. and Europe weaken, we expect Wolseley's earnings to continue to decline,'' London- based Goldman Sachs analyst Andrew Grobler wrote in a note to clients dated yesterday. ABN Amro analyst John Messenger reduced his recommendation from ``hold'' in a note today.
The following stocks also rose or fell in U.K. and Irish markets. Stock symbols are in parentheses.
U.K. Companies:
Benfield Group Ltd. (BFD LN) decreased 40 pence, or 15 percent, to 219.75. The U.K. reinsurance broker said 2007 profit fell 4.6 percent as the slide in the dollar and falling rates eroded revenue.
Charter Plc (CHTR LN) lost 24 pence, or 3 percent, to 790.5. Europe's biggest maker of welding gear said it sees uncertainty on the outcome of U.S. asbestos lawsuits.
EcoSecurities Group Plc (ECO LN) slumped 25 pence, or 18 percent, to 115. The Dublin-based manager of projects that generate emission credits said its full-year loss widened following a failed contract and a gain in administrative expenses.
Investec (INVP LN) decreased 2 pence, or 6 percent, to 328.25. The South African money manager and investment bank says it's in talks with Silversands Ethanol to fund a possible ethanol gel plant that could cost as much as 1 billion rand ($126 million).
Premier Oil Plc (PMO LN) decreased 54 pence, or 3.8 percent, to 1,356. The U.K. explorer with projects in the North Sea, Asia and Africa said 2007 profit fell 42 percent after a charge related to hedging oil prices.
Irish Companies:
C&C Group Plc (GCC ID) slid 24 cents, or 5.7 percent, to 3.938 euros. The maker of Magners cider sold 33 percent less of the beverage in the U.K. in January compared with a year earlier as the company faced increased competition from brewers, analysts said.
CRH Plc (CRH ID) lost 92.6 cents, or 3.8 percent, to 23.6 euros. The world's second-biggest maker and distributor of building materials agreed to buy Texas-based Pavestone Group LP for $540 million in cash to expand in concrete landscaping products.
Horizon Technology Group Plc (HOR ID) soared 98 percent to 92 cents. The only computer-services company traded on the Irish stock exchange said it has been approached by a third party interested in buying the company for more than twice its market value.
Kerry Group Plc (KYG ID) added 25 cents, or 1.3 percent, to 18.85 euros. Ireland's largest food company agreed to buy Reox Holdings Plc's Breeo Foods unit for 165 million euros ($257 million), adding products such as Dairygold spread and Galtee bacon.
Wolseley Plc, slumped the most in five years after Goldman, Sachs & Co. and ABN Amro Holding NV advised their clients to sell the stock.
The FTSE 100 Index decreased 108.8, or 1.9 percent, to 5,667.6 at 12:22 p.m. The FTSE All-Share Index lost 1.9 percent, while Ireland's ISEQ Index slid 3.2 percent.
Stocks in Europe and Asia dropped after Carlyle Group's mortgage-bond fund said it will default on its remaining debt and the dollar slumped against the euro and the yen, dimming the earnings outlook for banks and automakers.
HSBC, Europe's biggest bank by market value, retreated 2.6 percent to 774.5 pence. RBS, the U.K.'s second-largest, decreased 4.5 percent to 342.75 pence.
Carlyle's fund, which received more than $400 million in margin calls since March 5, today said it was unable to reach an agreement with lenders. Through March 12, the company has defaulted on about $16.6 billion of debt, and any remaining debt is expected ``soon'' to go into default.
Wolseley, the world's biggest distributor of plumbing and heating equipment, sank 7 percent to 546 pence. It was today's worst-performing stock in the U.K.'s benchmark FTSE 100 Index.
``As construction markets in the U.S. and Europe weaken, we expect Wolseley's earnings to continue to decline,'' London- based Goldman Sachs analyst Andrew Grobler wrote in a note to clients dated yesterday. ABN Amro analyst John Messenger reduced his recommendation from ``hold'' in a note today.
The following stocks also rose or fell in U.K. and Irish markets. Stock symbols are in parentheses.
U.K. Companies:
Benfield Group Ltd. (BFD LN) decreased 40 pence, or 15 percent, to 219.75. The U.K. reinsurance broker said 2007 profit fell 4.6 percent as the slide in the dollar and falling rates eroded revenue.
Charter Plc (CHTR LN) lost 24 pence, or 3 percent, to 790.5. Europe's biggest maker of welding gear said it sees uncertainty on the outcome of U.S. asbestos lawsuits.
EcoSecurities Group Plc (ECO LN) slumped 25 pence, or 18 percent, to 115. The Dublin-based manager of projects that generate emission credits said its full-year loss widened following a failed contract and a gain in administrative expenses.
Investec (INVP LN) decreased 2 pence, or 6 percent, to 328.25. The South African money manager and investment bank says it's in talks with Silversands Ethanol to fund a possible ethanol gel plant that could cost as much as 1 billion rand ($126 million).
Premier Oil Plc (PMO LN) decreased 54 pence, or 3.8 percent, to 1,356. The U.K. explorer with projects in the North Sea, Asia and Africa said 2007 profit fell 42 percent after a charge related to hedging oil prices.
Irish Companies:
C&C Group Plc (GCC ID) slid 24 cents, or 5.7 percent, to 3.938 euros. The maker of Magners cider sold 33 percent less of the beverage in the U.K. in January compared with a year earlier as the company faced increased competition from brewers, analysts said.
CRH Plc (CRH ID) lost 92.6 cents, or 3.8 percent, to 23.6 euros. The world's second-biggest maker and distributor of building materials agreed to buy Texas-based Pavestone Group LP for $540 million in cash to expand in concrete landscaping products.
Horizon Technology Group Plc (HOR ID) soared 98 percent to 92 cents. The only computer-services company traded on the Irish stock exchange said it has been approached by a third party interested in buying the company for more than twice its market value.
Kerry Group Plc (KYG ID) added 25 cents, or 1.3 percent, to 18.85 euros. Ireland's largest food company agreed to buy Reox Holdings Plc's Breeo Foods unit for 165 million euros ($257 million), adding products such as Dairygold spread and Galtee bacon.
Sunday, January 21, 2007
Premier League negotiates new overseas TV deal
LONDON: The Premier League negotiated a new overseas contract that will boost television revenue to 2.7 billion pounds (€4.12 billion; US$5.3 billion) in total over the next three years.
Covering 81 separate packages in 208 countries from the 2007-08 season, the new TV deal is worth 625 million pounds (€952,060; US$ 1.23 million), confirmed by the Premier League on Thursday.
It is added to the 1.7 billion pound (€2.6 billion; US$3.35 million) domestic deal with Sky TV and Irish channel Setanta, and a 400 million pound (€609,345; US$787,284) internet and mobile phone contract.
"This deal really does take us into another level," Premier League chief executive Richard Scudamore said. "Big clubs in other major footballing nations such as Real Madrid might negotiate big deals for themselves, but the deal is to be shared across the board by all our teams."
This season's league champions will earn 50 million pounds (€76 million; US$98 million), almost 20 million pounds (€30 million; US$39 million) more than Chelsea did for winning last year.
If Watford finish last, it will be relegated with 27 million pounds (€41 million; US$53 million), more than 10 million pounds (€15 million; US$20 million) than Sunderland did for coming last in 2006.
Real Madrid signed club soccer's most expensive TV rights deal in November, when it sold its broadcast rights to production company Mediapro in a seven-year deal worth €1.1 billion (US$1.41 billion).
Covering 81 separate packages in 208 countries from the 2007-08 season, the new TV deal is worth 625 million pounds (€952,060; US$ 1.23 million), confirmed by the Premier League on Thursday.
It is added to the 1.7 billion pound (€2.6 billion; US$3.35 million) domestic deal with Sky TV and Irish channel Setanta, and a 400 million pound (€609,345; US$787,284) internet and mobile phone contract.
"This deal really does take us into another level," Premier League chief executive Richard Scudamore said. "Big clubs in other major footballing nations such as Real Madrid might negotiate big deals for themselves, but the deal is to be shared across the board by all our teams."
This season's league champions will earn 50 million pounds (€76 million; US$98 million), almost 20 million pounds (€30 million; US$39 million) more than Chelsea did for winning last year.
If Watford finish last, it will be relegated with 27 million pounds (€41 million; US$53 million), more than 10 million pounds (€15 million; US$20 million) than Sunderland did for coming last in 2006.
Real Madrid signed club soccer's most expensive TV rights deal in November, when it sold its broadcast rights to production company Mediapro in a seven-year deal worth €1.1 billion (US$1.41 billion).
Till 'Big Brother', Shilpa's career was going nowhere
In 2000, Shilpa sued film magazine 'Stardust' for publishing an article about her relationship with actor Akshay Kumar.
By Arpana, IANS, [RxPG] New Delhi, Jan 19 - Shilpa Shetty, who made her debut in Bollywood with the 1993 super hit 'Baazigar' which also starred reigning superstar Shah Rukh Khan, never managed to touch the skies as a star. Her slinky dance numbers were more appreciated than her emoting.But now her popularity ratings have soared suddenly - thanks to the controversial Channel 4 reality TV show 'Celebrity Big Brother' in which she was the target of alleged racial abuse.The long-legged Indian beauty has hogged international media headlines after her sobs found an echo in the House of Commons and also got the Indian government into action to defend her against the alleged racial abuse targeted at her by her housemates on the TV show.The controversy over alleged racist epithets, that she later denied, has done wonders to her image and popularity. It has made people sit up. They want to know just who Shilpa Shetty is.After 'Baazigar', the dusky beauty with high arched eyebrows and large eyes starred in a few hits, including 'Main Khiladi Tu Anari', 'Auzaar' and 'Dhadkan'. But her magic began to wane after that. Post 'Dhadkan', she gave a string of flops including 'Karz', 'Rishtey', 'Hathyar', 'Chor Machaaye Shor' and 'Badhaai Ho Badhaai'. In 2004, her career took a turn for the better with Revathy's 'Phir Milenge', in which she played a successful creative director who is infected with HIV. Her power-packed performance made people take note. The 2005 release 'Dus', a star-studded action packed thriller in which she was paired with Sanjay Dutt, earned her accolades for her performance.Shilpa, the only Asian on the British TV show, has reportedly received Rs.35 million for participating in the programme. The programme has boosted her popularity higher than Aishwarya Rai's. On Thursday, Shilpa did an about turn on earlier allegations of racial abuse: 'I don't feel that there was any racial discrimination.' Apart from acting, the actress has been associated with socials causes like the AIDS campaign and People for the Ethical Treatment of Animals -. She was a part of an ad campaign organised by PETA against the use of wild animals in circuses and also featured in the BBC World Service Trust's campaign against AIDS.The Scotsman has reported that PETA is backing Shilpa to win the contest and have urged British viewers to vote for her.She had also appeared on Indian television as a judge on Sony TV's dance show 'Jhalak Dikhla Jaa' in 2006. However, this is not the first time that she is courting controversy. Last year, she made headlines when a lawyer filed a case against her for posing in an allegedly obscene manner in photographs published by a Tamil newspaper.Earlier, in May 2003 a controversy erupted over alleged links between her parents and the underworld. The owners of Praful Sarees had filed complaints against Shilpa's parents alleging that they had received threatening telephone calls from Mumbai-based underworld figures asking for money on behalf of the Shetty's.The Surat police issued arrest warrants against her parents on charges of extortion. In 2000, Shilpa sued film magazine 'Stardust' for publishing an article about her relationship with actor Akshay Kumar.Currently Shilpa's love life is nothing much to write about. She is footloose and fancy free, say those who know her.
By Arpana, IANS, [RxPG] New Delhi, Jan 19 - Shilpa Shetty, who made her debut in Bollywood with the 1993 super hit 'Baazigar' which also starred reigning superstar Shah Rukh Khan, never managed to touch the skies as a star. Her slinky dance numbers were more appreciated than her emoting.But now her popularity ratings have soared suddenly - thanks to the controversial Channel 4 reality TV show 'Celebrity Big Brother' in which she was the target of alleged racial abuse.The long-legged Indian beauty has hogged international media headlines after her sobs found an echo in the House of Commons and also got the Indian government into action to defend her against the alleged racial abuse targeted at her by her housemates on the TV show.The controversy over alleged racist epithets, that she later denied, has done wonders to her image and popularity. It has made people sit up. They want to know just who Shilpa Shetty is.After 'Baazigar', the dusky beauty with high arched eyebrows and large eyes starred in a few hits, including 'Main Khiladi Tu Anari', 'Auzaar' and 'Dhadkan'. But her magic began to wane after that. Post 'Dhadkan', she gave a string of flops including 'Karz', 'Rishtey', 'Hathyar', 'Chor Machaaye Shor' and 'Badhaai Ho Badhaai'. In 2004, her career took a turn for the better with Revathy's 'Phir Milenge', in which she played a successful creative director who is infected with HIV. Her power-packed performance made people take note. The 2005 release 'Dus', a star-studded action packed thriller in which she was paired with Sanjay Dutt, earned her accolades for her performance.Shilpa, the only Asian on the British TV show, has reportedly received Rs.35 million for participating in the programme. The programme has boosted her popularity higher than Aishwarya Rai's. On Thursday, Shilpa did an about turn on earlier allegations of racial abuse: 'I don't feel that there was any racial discrimination.' Apart from acting, the actress has been associated with socials causes like the AIDS campaign and People for the Ethical Treatment of Animals -. She was a part of an ad campaign organised by PETA against the use of wild animals in circuses and also featured in the BBC World Service Trust's campaign against AIDS.The Scotsman has reported that PETA is backing Shilpa to win the contest and have urged British viewers to vote for her.She had also appeared on Indian television as a judge on Sony TV's dance show 'Jhalak Dikhla Jaa' in 2006. However, this is not the first time that she is courting controversy. Last year, she made headlines when a lawyer filed a case against her for posing in an allegedly obscene manner in photographs published by a Tamil newspaper.Earlier, in May 2003 a controversy erupted over alleged links between her parents and the underworld. The owners of Praful Sarees had filed complaints against Shilpa's parents alleging that they had received threatening telephone calls from Mumbai-based underworld figures asking for money on behalf of the Shetty's.The Surat police issued arrest warrants against her parents on charges of extortion. In 2000, Shilpa sued film magazine 'Stardust' for publishing an article about her relationship with actor Akshay Kumar.Currently Shilpa's love life is nothing much to write about. She is footloose and fancy free, say those who know her.
Apple Set To Make 50% Margin On New Phone
Apple is set to hit consumers with a 50% margin on their new Apple mobile phone. Most rival phone companies operate on a 20% margin.
The popularity of Apple's iPod digital music players has created a hype surrounding the phone, scheduled to be launched in June, that should put Apple at the top of the profitability heap at least initially, iSuppli analyst Jagdish Rebello said.
"That's extremely, extremely high in this business," he said. "Apple, at least when it enters the market, is entering it as a niche player.
preliminary analysis from iSuppli states that they estimate the iPhone from Apple has over a 50 percent gross margin which all comes back to Apple since they do not allow carriers to subsidize or discount the phones.
“With a 50 percent gross margin, Apple is setting itself up for aggressive price declines going forward,” said Jagdish Rebello with iSuppli.
According to iSuppli, the total expense to manufacture the 8GB iPhone is estimated to be about $280, leaving $319 in profit $599 price tag. The firm did not have an actual iPhone device available to them to take apart, so this estimate was made from the knowledge and experience with similar parts from other products.
The firm estimated that the cost for the flash memory was the most expensive component of both the 4GB and the 8GB iPhones, which was surprisingly more than even the touchscreen, one of the key unique features of the Apple product. The cost of the touch screen was estimated at $33.50, while the cost of the 4Gb and 8GB flash memory was $35 and $70, respectively.
A representative from iSuppli also predicted that many competitors will start releasing similar products to the iPhone, with the closest competitor current being the KE850 from LG.
We here at SlipperyBrick would have to agree and are pretty sure that there will be plenty of competitors with similar products to compete with the Apple iPhone, and that will hopefully bring down the price a little bit. I appears that Apple has a little wiggle room in that area.
The popularity of Apple's iPod digital music players has created a hype surrounding the phone, scheduled to be launched in June, that should put Apple at the top of the profitability heap at least initially, iSuppli analyst Jagdish Rebello said.
"That's extremely, extremely high in this business," he said. "Apple, at least when it enters the market, is entering it as a niche player.
preliminary analysis from iSuppli states that they estimate the iPhone from Apple has over a 50 percent gross margin which all comes back to Apple since they do not allow carriers to subsidize or discount the phones.
“With a 50 percent gross margin, Apple is setting itself up for aggressive price declines going forward,” said Jagdish Rebello with iSuppli.
According to iSuppli, the total expense to manufacture the 8GB iPhone is estimated to be about $280, leaving $319 in profit $599 price tag. The firm did not have an actual iPhone device available to them to take apart, so this estimate was made from the knowledge and experience with similar parts from other products.
The firm estimated that the cost for the flash memory was the most expensive component of both the 4GB and the 8GB iPhones, which was surprisingly more than even the touchscreen, one of the key unique features of the Apple product. The cost of the touch screen was estimated at $33.50, while the cost of the 4Gb and 8GB flash memory was $35 and $70, respectively.
A representative from iSuppli also predicted that many competitors will start releasing similar products to the iPhone, with the closest competitor current being the KE850 from LG.
We here at SlipperyBrick would have to agree and are pretty sure that there will be plenty of competitors with similar products to compete with the Apple iPhone, and that will hopefully bring down the price a little bit. I appears that Apple has a little wiggle room in that area.
Microsoft could launch Zune in Europe by end 2007
Microsoft is happy with the early sales of its Zune music player in the United States and it could launch the service in Europe before the end of 2007, its marketing director said on Saturday.
Jason Reindorp told Reuters that Microsoft was realistic about the challenge it faced in trying to crack into the digital music player market, dominated by Apple's iPod.
"You couldn't get a more entrenched competitor," he said at the annual music industry Midem Net conference in France. "But we feel really good about the first steps that we've taken."
Reindorp said Microsoft was not yet ready to officially announce when it would launch the service in Europe but it could possibly be out before the end of the year.
"The industry moves in this sort of Christmas to Christmas cycle. So you can expect that there will be more devices, more features in the market at that point," he said.
Jason Reindorp told Reuters that Microsoft was realistic about the challenge it faced in trying to crack into the digital music player market, dominated by Apple's iPod.
"You couldn't get a more entrenched competitor," he said at the annual music industry Midem Net conference in France. "But we feel really good about the first steps that we've taken."
Reindorp said Microsoft was not yet ready to officially announce when it would launch the service in Europe but it could possibly be out before the end of the year.
"The industry moves in this sort of Christmas to Christmas cycle. So you can expect that there will be more devices, more features in the market at that point," he said.
Friday, January 19, 2007
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