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2020 has been earmarked the UK Year of Climate Action. Judging by the weather that we have recently experienced, mother nature is keen to reinforce the message.
Climate change continues to be a divisive and controversial topic. The top 10 warmest years in the UK, have all occurred since 2002. Higher temperatures mean more water evaporates in the air to then fall as rain. The UK is becoming more vulnerable to extreme weather events as demonstrated by the severe flooding in parts of the country recently during storms Ciara and Dennis.
The Met Office has recently secured funding for a new £1.2bn supercomputer to further improve longer-range weather forecasting. The new supercomputer which will come on stream in late 2022 will have computing capability six times greater than currently and then within another five years will see performance improve a further three-fold. The data produced is expected to be the world’s most advanced dedicated to weather and climate. This will help shape Government policy as part of the UK leading the global fight against climate change and meeting net zero emission targets.
Weather forecasting is big business whether it’s for business, agricultural, military or power generation industries. This latter area is all the more important with the growth of greener wind and solar power generation. Likewise, more accurate weather forecasting could help airports or the Environment Agency plan for potential flooding. The government estimates that for every pound invested in more accurate weather forecasting that there could be a £19 economic benefit.
While more accurate long-range weather forecasting is to be welcomed, sadly it is too late to help those poor individuals who have suffered from flooding in the recent storms. If the government is looking to infrastructure projects to boost the UK economy, then stepping up investment in river flood defences looks a good place to start.
What have we been watching?
Markets are taking the coronavirus outbreak much more seriously with the spike in cases in South Korea, Iran and Italy over the weekend raising fresh fears that the world is edging closer to a coronavirus pandemic. In each of these countries the virus has spread with no connection to China. The lockdown in Italy mirrors those that have happened in China. The situation in Iran is especially worrying as it has spread to several cities while Lebanon, Afghanistan, Kuwait and Bahrain have reported their first cases, all involving people who have returned from Iran. As in China, travel restrictions and lockdowns will inevitably have an adverse impact on global economic activity which may continue to have an effect beyond the first quarter of 2020.
Global markets had been taking the coronavirus outbreak in their stride but suffered the first reality check early last week, with a profit warning from Apple along with a number of other companies which highlighted disruption to their Chinese retail or supply chain operations. Nonetheless, Chinese employees are starting to return to work despite some being hampered by travel restrictions, while many factories have resumed production albeit most are currently operating below normal capacity. Meanwhile, the BBC continues to show reports of near empty streets in Beijing.
The February ‘flash’ PMI activity indicators have provided the first measure of how coronavirus is impacting business confidence. These highlighted predictable regional differences with Japan hit especially hard by the impact on travel and tourism. The Eurozone and UK were more reassuring although manufacturers highlighted possible supply chain disruption from China.
Trade war concerns resurfaced with US media reports that President Trump is contemplating new bans on exports of semiconductor and jet engine technology to China. In the meantime, the dispute over subsidies to aircraft makers has escalated with Washington raising the tariff on Airbus and other aircraft parts from the EU from 10% to 15%. Meanwhile, Spain is to follow France and the UK by looking to impose a digital services tax on major US tech firms.
In the UK, the Budget will go ahead as planned on 11th March, following the change in Chancellor. Meanwhile, average weekly wages have reached their highest levels since before the financial crisis, increasing by 3.2% final quarter of 2019. Petrol prices and air fares were the main contributors to UK headline inflation hitting a six-month high in January with an annualised CPI inflation rate of 1.8%.
In the US, the minutes from January’s Federal Reserve meeting was released which showed that members view the US economic outlook as ‘somewhat more favourable’ despite coronavirus risks and are staying with their view that interest rates can remain unchanged this year. However, the US Service sector activity indicator reading was much weaker than expected and signalled the first decline since early 2016.
The first signs of the short-term knock-on effect of the coronavirus outbreak was reflected in weaker Japanese export orders which fell by more than expected in January.
Brent oil edged up after forces loyal to military commander Khalifa Haftar bombarded the port of Tripoli. In addition, the Trump administration has blocked a trading subsidiary of Russian oil company Rosneft from helping Venezuela export oil. Brent oil has subsequently drifted back to $56 on the latest coronavirus news.
Finally, the BBC was recently taken on a tour of the Bank of England’s gold bullion reserves. Apparently, according to the guide, anyone looking to do an ‘Italian job’ on the bank vault would need 4,000 Minis to pull it off!
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