Tonight:
4°c
Normally a cheery chap, my old friend Ian Harnett of the independent research outfit Absolute Strategy has come up with a cracking piece of analysis which you dare not show your children.
There has been plenty of anecdotal evidence that, as ever, the top-selling toys, games and gadgets will be hard to get hold of this Christmas. But then the retailers always like to tell us that at about this time of year to encourage us to buy early.
But Harnett has come up with rather more empirical evidence which suggests that this time around it may not just be retailers' hype. Indeed, he goes so far as to suggest that it was the credit crunch which stole Christmas.
He is a great lover of charts, and his opening one is a stunner. It shows that world exports of toys this year are down 22% year on year which is their worst level for more than 10 years.
The last time things were anything like as bad for toy exporters was the Far East financial crisis of 1997, which rolled into the Russian crisis of 1998. Even then the fall in exports did not quite reach 20%.
Harnett has also unearthed the evidence for why demand has slumped. German and French retailers have destocked so much that their current levels of toys ready to go on the shelves or out over the internet are also 20% down and at 20-year lows. (Comparable statistics don't appear to be available for the UK but there is no reason to doubt it's similar over here.)
It is relatively easy to realise that toy retailers (like everyone else) have suffered a double blow. First came the credit crunch and one of its most devastating effects on retailers and exporters was the sharp hike or even withdrawal of credit insurance which guarantees payments from the one to the other. At the same time, retailers judged the mood of the consumer too grimly. They cut back on stocks sharply during the key buying season in the summer expecting a poor Christmas.
Now the recession has ended or is ending more quickly than many people expected. Evidence, again from Germany, shows that retailers have started to panic order intending to restock heavily in the next couple of months.
But have they left it too late? About 70% of European toys are imported, of which China produces 90% and the rest of Asia another 8%. The latest export figures from China (which presumably correlate closely with our imports) for August show toys down a staggering 30% year on year. That's not the kind of gap you can close by turning on a few more machines and pressing out some more plastic moulds.
Indeed, even if you could, there's not much chance of getting containerloads of toys here by sea in time.
As Harnett puts it bluntly: “Quite simply, there may be nothing there to meet any last minute rush in demand.” Meanwhile, the UK toy industry has for the first time in 12 years moved from deflation to inflation. Prices that were 6% down last Christmas are likely to be up between 2% and 4% this year, partly because of the weakness in the pound.
On top of that, retailers who decide their stocks are too low will be forced to cut their margins by ordering using speedy but vastly more costly airfreight services. Fast logistics companies such as TNT and DHL and airlines like BA and Lufthansa could do very well.
Of course, there is one simple answer: Do your shopping early.
* Another 500 people lost their jobs with Lloyds Banking Group in the past week as it sold off Halifax Estate Agents (460) and Bank of Scotland discretionary fund management (40). That takes the total job losses so far this year to 8,000. And each and every one of them has been communicated in the same ghastly way. The latest was “460 colleagues will be affected”. I hate that phrase. If I'm about to lose my job, I do not want to be referred to as a colleague, which has such a patronising overtone.
I know where this habit started. It began at the Halifax, continued at HBOS and lives on at Lloyds. There is one person who is clearly linked to all of those, and if it doesn't stop now, I will be forced to name and Shane him.
Mervyn's governor when it comes to saying it right
You have to hand it to Mervyn King. On the day Nick Griffin is being lambasted for using images of the Battle of Britain to recruit for the BNP, the Bank of England Governor paraphrased Churchill with his “never in the field of financial endeavour has so much money been owed by so few to so many.”
Back of the net, Merv. You got the headlines you wanted, and debate on the future of banking moved up a notch.
Since Jenny Scott hung up her boots as the BBC's economics correspondent and took on her role as director of communications at the Bank of England some 16 months ago, there hasn't been a dull moment.
Of course, the banking crisis has helped, but am I alone in feeling it is no coincidence King has being making a bigger impact in recent months?
Yesterday we had his article in the Glasgow Herald following his speech in Edinburgh. His comment that interest rates “will return to more normal levels” was good for an extra couple of cents on the value of the pound.
Yet it was a mere month ago that, in an interview with the Newcastle Journal, he said the fall in the exchange rate had been helpful which knocked two cents off the pound.
What's fun about these regional pronouncements is that they appear unplanned. They catch the markets on the hop, usually breaking hours after they are actually published. I won't even complain about the fact that the Governor of the Bank of England is making major policy statements in a foreign country.
The bank is always on about “managing expectations” but it actually does a very good job of slipping us the odd googly. There must be an economic theorem to cover that.
Hands' tactics just don't wash
Guy Hands appears to have come up with a new version of greenmail. The original version was where someone bought enough shares in a company to threaten a takeover and then forced the company to buy the shares off them at a premium.
Private-equity raider Hands has actually launched his takeover bid for renewable energy company Novera. But tucked in his offer document are blatant threats of what will happen if minority holders don't accept his bid.
These include issuing new Novera shares to himself, shifting contracts from Novera to his company Infinis and similarly stripping Novera of its assets. Blackmail at a green company. This is the worst kind of corporate raiding and shareholders such as 3i, Aviva and Caledonia are taking a principled stand.
Yes, it will probably all come down to the bid price in the end but Hands must be told he can't behave like this. Let's hope there's a white knight to kill this greenmailer.
