Interesting week of economic news in the UK to round-up:
- The ONS estimates around 600,000 people have lost their jobs in the last 3 months, but that this total will continue to increase sharply as the furlough scheme rolls off. Equally, job creation still remains quite high and also will continue as new companies appear to replace those impacted by Covid-19.
- The Bank of England thinks the economy shrinking 20% in Q3 is a good result as it had feared a 27% fall - however, it and the ONS estimates are very shaky for huge sectors of the economy like Travel and Leisure.
- The Bank of England also has put another £100 billion of quantitative easing into the economy. This will be huge boost to money supply which was lacking as demand fell away so much across the economy.
The big impact is that this money, together with the Federal Reserve, has succeeded where they failed in 2008. We had a 25% sell-off but the bounce back, supported by the Central Banks, has been impressive considering the circumstances. To me still it is only putting off the inevitable and cushioning the blow. However, that may in itself help to temper the worst of the recession. Funds and Asset Managers still have a 'risk-on' mindset.
I still think we are in for a choppy few months and an eventual nasty crash, but with the huge pump priming of the money markets, asset prices will hold up as those lucky recipients of free money it swap it for real assets.