Director’s Weekly News – 23rd July 2018

Dear all,

Detailed below is the weekly news update for week commencing 23rd July.

Have a good week.

 

Gordon Polson – Director

Federation of Bakers

CBI Economic Update: Moderate rebound for growth likely in Q2.The ONS’ first ever monthly GDP release showed a slight improvement in growth in May, but the pace of expansion remained relatively weak. With surveys suggesting that activity held up in June, real GDP growth is on track to rebound moderately in Q2 following a weak Q1.The ONS released its first measure of monthly GDP for May, which showed a mixed picture of the UK economy. GDP accelerated to 0.3% month on month in May, (compared with 0.2% in April and no growth in March), pointing to a slight rebound in activity through the latest quarter, following weak growth in Q1. However, growth was relatively unbalanced by sector, driven entirely by the services sector, partly offset by falling construction and industrial output.

Within services, growth was broad-based: and notably strong in distribution (retail, wholesale and motor trades), likely due to a boost from the warmer weather and the royal wedding.

Industrial production, meanwhile, was a drag on growth in the three months to May. Output in manufacturing and electricity, gas, steam and air conditioning fell, which was more than enough to offset growth in mining & quarrying and water supply, sewerage & waste management.

Monthly output growth in construction improved significantly in May alone (2.9%), following a broadly negative start to 2018. Nonetheless, on a quarter on quarter basis (which smooths out monthly volatility), output fell for the seventh consecutive month, the longest negative streak since 2012.

Recent survey data also supported the notion that the UK will see a moderate pick-up in growth in Q2. The latest IHS Markit/CIPS composite PMI was up on Q2 as a whole, driven by a pick-up in construction and particularly services. The manufacturing PMI signalled that growth remained relatively subdued compared to stronger growth at the turn of the year. The composite PMI currently points to GDP growth of 0.4% in Q2, in line with the CBI’s growth indicator.

Meanwhile, labour productivity fell by 0.4% on the quarter in Q1 2018, continuing the weak trend in productivity observed since the Great Recession. This drop was driven by low output growth (presumably due to bad weather) against another strong expansion in average hours worked.

Farmers Guardian report on the impact of the hot weather on the harvest: While the hot weather and lack of rainfall has eliminated the need to dry many cereal crops, some growers have had to stop harvesting oilseed rape (OSR) because the seed was too dry, with the moisture content of some seed as low as 5.5 per cent. Bedfordshire farmer, David Ainsley says: “I started harvesting a crop of Campus yesterday [July 15], but I had to stop because the moisture content was averaging below 6 per cent and was as low as 5.5 per cent in places. There is rain forecast later in the week and so I am hoping that will lift the moisture content sufficiently to avoid rejections.

“Although the seeds appeared small, the small bit of the field I harvested averaged 3.8t/ha so there must be plenty of seeds per sq.m.”

Cambridgeshire farmer, Tom Martin has barely had any rain for the last two months, with the exception of a light shower on June 16. While OSR crops are coping with the dry conditions, he believes wheat crops are suffering.

He says: “We are well into our oilseed rape harvest, with crops holding up okay on our heavy clay land. So far we have harvested Elgar, which has averaged around 3.5t/ha – down from our longer term average which is closer to 4t/ha, but given the weather we are pleased.

“Our wheat is coming forward worryingly quickly and I guess we will be combining it by the weekend [July 21]. The sample looks very poor indeed, despite looking good for most of the season – I suspect yields will be down.”

Results from the first two AHDB Recommended List (RL) winter barley trial sites show a two tonne/hectare yield difference. While in Lincolnshire, crops averaged 11.07t/ha (4.48t/acre), in Suffolk yields averaged a more modest 9.03t/ha (3.65t/acre).

The overall yield average of control varieties from the two trials so far in 2018 is 10.05t/ha (4.07t/acre), contributing to a five-year control average yield of 9.88t/ha (3.99t/acre).

The variable yields are not surprising, according to AHDB, given the wet weather in March and April and the dry weather in June, which saw soil moisture deficits the highest recorded since 1961.

Yield differences will depend on crop establishment and rooting over the winter and the moisture retention capability of the soils over the dry summer spell, say AHDB.

Tesco: It is reported this morning that Tesco is planning a chain of discount stores to fight off the competition from Lidl and Aldi. It was reported that 60 new stores could open with several sites identified and staff recruitment under way.

Modern Bakery, CampdenBRI and Newcastle University have secured funds from Innovate UK to carry out R&D into healthier bread.