Wednesday April 25th must have been the morning David Cameron felt like phoning in sick. The Office of National Statistics officially confirmed that a shock 0.2% contraction in growth had pushed the UK into its first double dip recession since the 1970s. Meanwhile the Leveson Inquiry rumbled on with Culture Secretary Jeremy Hunt facing calls to resign; Labour opened an eight point lead in the opinion polls and there were predictions that the increase in diabetes could bankrupt the NHS. All in all a good day for a sick note…

The situation in Europe was not much better. Spain looked increasingly jittery as the Government admitted that the country’s debt would jump to a 20 year high, with a debt-to-GDP ratio of 79.8%. To compound matters, much of the debt of the Spanish regions was downgraded to junk. The eurozone crisis claimed its latest victim when the Dutch Government of Mark Rutte collapsed over disagreements about the inevitable cuts.

Stock markets around the world were volatile throughout April – and yet surprisingly many markets finished the month little changed overall.

In the US Facebook paid $1bn for Instagram – a company that has never made a profit – whilst Warren Buffet invested $2bn in a solar energy plant that will supply electricity to large parts of California for the foreseeable future. Time will tell who made the better investment…


Despite his troubles by the month-end, April started well for David Cameron. The Purchasing Managers’ Index for March showed an increase on the February figure and this is usually taken as a positive sign for the economy. The rise – from 53.8 to 55.3 – was hailed as clear evidence that the worst was over and that the UK would avoid a double-dip recession.

Unfortunately, there was always bad news lurking round the corner and despite the efforts of Mary Portas to revive the High Street, Deloittes reported that retail failures had cost 10,000 jobs in the first quarter of the year. Like-for-like sales for the first quarter were down at Marks & Spencer (they described the current outlook as “challenging”) and Tesco saw their profits fall for the first time in 20 years.

But the UK retail situation may not be as gloomy as the big battalions would have us believe. Whitbread reported continuing growth in its Costa and Premier Inns chains, and Starbucks confirmed an eleventh consecutive quarter of growth in the UK. Perhaps more significantly, the British Independent Retailers Association said that independent shops had net openings of over 2,500 shops in 2011 – the equivalent of ten small towns worth of new shops. BIRA claimed that ‘independent shops are saving our towns on their own.’

The March figures showed that UK inflation rose slightly, reaching 3.5% and the final figures for February also confirmed that the trade deficit had worsened to £3.4bn. Nationwide reported that house prices fell by 1% in March, with UK prices now generally 0.9% lower than they were a year ago. The price of a typical home is now £163,327.

Despite the bad news, and the threat of further uncertainty ahead, the FTSE finished the month virtually unchanged at 5,738 – down 30 points from the end of March.


Europe in April was the now traditional mix of doom, gloom and credit downgrades. Spain was again the main whipping boy, and several of the country’s regions are now paying interest rates on their debt that is described as “impossible.” There are genuine fears of a domino effect within Spain itself, with worries that one region could turn to Madrid for help with its finances as early as May.

The yield on the country’s 10-year government bonds hit 6.1%, the highest since December. Standard & Poor’s downgraded Spain’s credit rating to BBB+ and warned that the recession in Spain was likely to deepen by the end of the year. With unemployment at around 25% and fears that the Spanish banks may require a €120bn bailout, it was hardly surprising that the country’s Ibex 35-share index fell to 7,011 – down 12.45% on the month.

(To put Spanish unemployment in perspective, the only countries reporting higher levels of unemployment are Rwanda, Angola, Macedonia and Namibia.)

In France, all eyes turned to the Presidential election as Nicolas Sarkozy tried to hold off Socialist challenger Francois Hollande. The first round of voting was notable for a very strong showing from National Front candidate Marine Le Pen, with nearly 18% of the vote. The second round is on May 6th and at the moment most commentators expect Sarkozy to lose out to Hollande. This would undoubtedly herald loud cheers in Greece and a clash with Angela Merkel, as Hollande is far less in favour of the austerity measures currently being pursued in Europe.

Both the French and German stock markets retreated in April, with Germany’s DAX index down just over 2% at 6,801. It will be interesting to see the reaction if Francois Hollande defeats President Sarkozy.


In the US, April was a good month for Mitt Romney as Rick Santorum finally pulled out of the Republican race, leaving the way clear for Romney to challenge President Obama in November.

For Wal-Mart however, April proved to be a very bad month as they became mired in bribery allegations at a Mexican subsidiary. Lawyers rubbed their hands and announced that the firm would face a “two to four year investigation” under the Foreign Corrupt Practices Act. Subsidiary companies (including Asda) in all countries came under scrutiny and, not surprisingly, Wal-Mart shares tumbled.

The economic indicators were largely positive for the US: the March figures confirmed that another 120,000 jobs had been added; inflation fell to 2.7% and when the numbers were finally crunched for February’s trade deficit, the good news was that it had fallen to $46bn.

US GDP rose by 2.2% in the first quarter and consumer spending also rose as some commentators suggested that the US had benefitted from not going down the austerity-at-all-costs route favoured in Europe. As Philip Inman put it in the Guardian, “Ultimately the US cared less about its AAA rating than about jobs and living standards, saving austerity for a time when the economy is stronger.”

The Dow Jones index finished the month at 13,214 – up precisely two points on the end of March figure.

Far East

China yet again increased its holding of US debt, buying $12.7bn of US bonds. According to the BBC, China now holds $1.17tn of US debt and continues to be the largest foreign buyer.

Significantly China had an unexpected trade surplus in March which many experts suggest heralds a rebound in the global economy. Exports rose by 8.9% from the same month last year while imports rose 5.3%, to give the country a $5.4bn surplus for the month.

China’s inflation rate rose to 3.6% in March (including food price inflation of 7.5%) and the economy continued to expand at a rate countries in the west can only dream about.

After a trade surplus in March, Japan swung back into deficit in April, with energy imports outweighing car exports.

Both the Chinese stock market and Hong Kong’s Hang Seng index rose during the month, but the Japanese market fell back 5% to finish at 9,521, perhaps weighed down by worries about the high level of energy imports.

Emerging Markets

Emerging Markets can always be relied on to provide a heady mix of the astonishingly good and the downright frightening – sometimes within the same economy.

So while the UK and Europe worry about negative growth, some emerging economies are recording double digit year-on-year GDP growth, with particularly strong performance in many African countries. Even relatively ‘mature’ emerging countries such as Turkey and India have achieved growth of 5% and above.

The stock market phenomenon which is Venezuela has been well documented in this bulletin: the market rose another 30% in April, but Venezuela also tops the league tables for inflation, with a current rate of 24.6%, and interest rates are in excess of 15%. Something has to give at some point.

Brazil is often heralded as a success story and clearly there is going to be major investment in the run-up to the 2014 World Cup. But potential investors should note that the country has interest rates at 9% and inflation in excess of 5% – a not uncommon picture in emerging economies. The Brazilian stock market fell back by 5% in April, but remains up on a year-to-date basis. Among other stock markets Thailand was the star performer, rising by 16% during April.

And finally…

As you look forward to two days off in June courtesy of Whitsuntide and the Diamond Jubilee, dark forces may be at work.

The Centre for Economics and Business Research has called for all UK bank holidays to be scrapped, saying it would add £19bn to the country’s total economy. Each bank holiday apparently costs £2.3bn in lost output.

The phrase ‘get a life’ comes to mind…

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