Hot Cornwall points to rapid economic recovery


I am in Cornwall. I am not alone. Last weekend, the news channel happily reported that there were more people here than London.

It takes us 14 hours to drive from Edinburgh to here. On Monday morning, Harlyn Bay is a very popular North Coast beach with 2,500 cars in the parking lot. I have never seen so many Land Rover discoveries in one place.

Before we left Scotland, I spent an hour on the phone trying to book dinner. I finally got a table in a south coast village not too close to the sea. 17:00. One hour. Prices follow demand. Seven people surfing lesson? 380 pounds. Coffee and croissant for 3 people? 21 pounds. “Hampton price,” an impressive New York friend said panting.

A boat dealer friend in Cornwall usually has 100 ships for sale on their book. Today, everything listed is in one day. I suspect that I have very few friends, maybe none, exaggerating.

The market price of a two-bedroom apartment in our village is close to 400,000 pounds. I am getting older and still remember when you can buy a house here for the price of a Harlyn Bay surf course.

I want to tell you that my vacation is simple: I am in the whirlpool of Britain’s stunning V-shaped recovery. The demand that has been suppressed for the past 16 months has been directly released to its bars and beaches. Long live. From anecdotes to data, you will see the same thing.

Figures released this week show Purchasing Manager Index (PMI) is 62.9, which is the highest level ever, driven by service demand-you guessed it. Official data show that service companies will raise prices when they reopen.

At the same time, UK house prices Increased by 10.9% In the year to May (now an average of £242,832). This is partly about stamp duty holidays, partly about low interest rates, partly about people moving from high-cost areas to low-cost areas where they can bid high prices, and partly, maybe mainly about money.

During a pandemic, the large amount of cash our government (and others) throws at us to ease their lockdown policy often surprises us. We have, OECD says, Was thrown out of the “unprecedented protection policy network.”

But even if we are used to big numbers, it is still worth reminding us how much we are talking about.This National Audit Office The current total is 372 billion pounds. About 150 billion pounds is used for direct support to enterprises, and another 50 billion pounds is used for direct support to individuals. According to the International Monetary Fund, all these together account for about 16% of GDP. That’s real money, an extraordinary Keynesian experiment, and also an OECD Note that this is not “ordinary recovery”, and The US GDP is expected to grow by 7.2% this year and 5.5% next year.

A useful way to understand what is happening here is to look at the fiscal multiplier, which is the average percentage increase in national income when government spending increases by 1% of national income.

If it is higher than 1, the recovery will be stronger: GDP growth will exceed government spending, helping to minimize the impact of increased spending on public finances.

However, the usual problem is that it is usually lower than 1, and the opposite happens. According to data from the Institute of New Economic Thinking, before the 2008-09 global financial crisis, it was generally believed that the multiplier averaged about 0.5.

If it stays there, we will have some trouble now. However, it apparently failed to do so. Various studies have shown that when spending is financed by debt, monetary policy is loose, and the economy is weak, you will get a higher multiplier.

A recent study showed For example, the multiplier for transferring students from low-income families to the United States is as high as 2.4. How is the UK now? We will not know for now. In November, the Office of Government Budget Accountability recommended a multiplier Not higher than usual Due to the epidemic.

But look at the money that goes directly to consumers, and you will soon get a hint that an academic paper written a few years later will prove that OBR is wrong. One clue is that last month’s taxes were better than expected.

We may even find that with a higher than usual fiscal multiplier, we are not spending less but spending more to ensure a rapid recovery, even if it relieves the pressure of many disadvantaged groups.

This is part of the reason why I have to have dinner at 5 pm on Wednesday afternoon. This is also why you should pay close attention to inflation, while the “temporary” central bank keeps telling you it is.

In my opinion, British families seem to have spent every penny this week. However, Pantheon Economics stated that during the pandemic, we still had “excess savings”, which accounted for about 8% of UK GDP. I started to spend this time. There was an hour to eat ordinary pizza at 5pm. Not enough employees remember to bring a drink and it would start to look like a distant dream.

How should your portfolio respond? Be cautious. To some extent, the UK is the cheapest developed market, and there are good reasons to participate.

In the case of low growth in general, it makes sense to pay for stocks with obviously high growth levels such as technology. With the (rapid) economic recovery, this is no longer the case, which makes the UK stock market’s orientation towards value stocks look more interesting than it was a few months ago.

Gold (which rose more than 7% last month) is also telling you something, especially during periods of inflationary panic, it is a better means of holding value than Bitcoin. If you want a UK value-oriented investment trust (you do!), maybe you can look at Fidelity Special Values ??(I own). It has rebounded sharply from last year’s low, but only rose 8% in three years. With the booming development of the UK this year, there should be more things to do.

Merryn Somerset Webb is the editor-in-chief of MoneyWeek. Views are personal. [email protected]. Twitter: @MerrynSW





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