Bull watch

Media coverage of the recession is becoming more and more unhinged.....

* I'm sure you've noticed that ONS has confirmed that the UK is now in a recession, with GDP falling in both Q3 and Q4 of 2008. But did you also notice that retail sales rose in December -- up 1.6% in volume terms from December 2007 levels. That's on top of an equally "unexpected" 1.5% gain in November. There are caveats about the data (the VAT cut for one), but these numbers do rather give the lie to all the doom-mongering from the BRC, CBI and others. I guess these guys are just jealous of those sectors of the economy that really are in recession, like manufacturers and homebuilders. No doubt they'll come out with some statement casting doubt on the ONS data, and saying that anyway, things will be worse in January. However, given that John Lewis just reported a 4% sales rise in its latest week of trading, that might need to be taken with a pinch of salt as well.

* Early in the week the BBC's Robert Peston poured scorn on anyone who said that the resumption of short selling might have contributed to the sharp falls in bank stock prices. He "understood" that there had been very little short selling. Today one hedge fund, Landsdowne, announced it had made £12 million in four days from shorting Barclays plc. Peston stands corrected, right? No, no.... he says in his BBC blog that it's ridiculous to think that Landsdowne's tiny short position could have caused the carnage. I don't suppose it occurs to him that Landsdowne might not have been the only hedgie looking for a piece of the action. The world and his dog knew that the hedge funds had been gearing up to whack the banks as soon as the lifting of the short sale ban was announced. It probably also wouldn't occur to Peston that regular investors, watching the hedgies getting tooled up, might have seen fit to lighten up their holdings of bank stocks as a precaution against getting mullered.

* A number of commentators have pointed out that UK exports were weak in November "despite the collapse of Sterling to multi-year lows". Two explanations for this suggest themselves. One is that there is always a delay between a currency depreciation and improvement in a country's balance of payments -- something about a J-curve effect if memory serves. The other is that a large part of Sterling's fall has taken place in December and January, which makes it highly unlikely that it could have had any impact on trade data for November.

* David Cameron says that confidence is the key to economic recovery. Can this be the same David Cameron whose party has bitch-slapped anyone who has dared to express any hope for the future of the economy, and who is today warning that the IMF might have to get involved?

Wow. Bull watch may have to become a regular feature. I don't think I'll run out of material any time soon.