Covid infections remain elevated after lockdown
The number of daily new Covid infections has remained elevated in the past month after the removal of most pandemic restrictions, fuelled by the Delta variant. The latest daily figures up to 25 August show 35,847 people tested positive for Covid-19 across the UK, an increase from the start of the month. Almost 48 million people have had a first shot of a coronavirus vaccine, about 88% of the adult population. More than 42 million have had a second, about 77%.
Travel remains above pre-pandemic levels
The number of trips taken on the UK’s roads and using public transport stayed above pre-pandemic levels in the past month after the removal of most remaining Covid-19 restrictions in July. According to Apple mobility data – which records requests made to Apple Maps for directions – bus and train journeys are almost 50% above levels recorded in January 2020, while walking and driving has also risen. However, overall retail footfall in mid-August was still at 82% of the level recorded in the same week of 2019, before the pandemic, reflecting continued caution as Covid infection rates remain high.
Tapering fears weigh on global stock markets
Global financial markets have come under pressure in the past month as central banks consider tapering their emergency Covid-19 support packages, despite weaker growth in the world economy amid the spread of the Delta variant. In London, the FTSE 100 has dropped by about 100 points from a high of 7,220 in mid-August. However, the leading index of UK company shares remains higher than its starting point for the month, in a sign that some confidence remains in the global recovery.
Cooling inflation offers temporary reprieve
Retailers cut prices of clothes, footwear and cheaper electronic goods last month, which helped push down the annual rate of UK inflation by more than expected. The Office for National Statistics (ONS) said the consumer prices index fell from 2.5% in June to 2% in July, as retailers returned to more usual patterns of seasonal discounting than in 2020 when the first Covid lockdown weighed heavily on the economy. The Bank of England has said, however, that inflation could rise temporarily, reaching close to 4% this year, before pandemic-related disruption gradually fades.
Staff shortages sap economic recovery
Britain’s economic recovery from lockdown faded in August as businesses faced the worst shortages of workers and materials in decades. The IHS Markit/Cips purchasing managers’ index, a closely watched gauge of private sector activity, dropped to 55.3 in August from 59.2 in July. Any reading above 50 indicates expansion. It comes despite the easing of most remaining pandemic restrictions in England on 19 July, as firms struggle to recruit staff, endure temporary “pingdemic” absences and grapple with global supply chain problems. Growth was higher in the eurozone than the UK, although continental firms were also hit by supply chain disruption. US private sector output also fell.
Retail sales unexpectedly fall
Retail sales in Great Britain experienced a sharp, unexpected fall in July, after a mini-boom during football’s European Championship a month earlier. The ONS said sales volumes fell by 2.5% between June and July as spending declined across much of the high street and food sales tumbled after the end of the tournament. City economists had forecast a modest 0.4% rise on the month. Falling retail sales were also driven by consumers spending more in pubs, cafes and restaurants at the expense of supermarkets, after the easing of Covid restrictions.
Government borrowing falls
Millions of workers coming off furlough and an improving economic outlook helped to bolster the public finances in July, with a £10.1bn drop in public sector borrowing compared with the same month a year earlier. The government’s budget deficit – the gap between spending and income – fell to £10.4bn, amid a decline in the number of workers on furlough and a rise in self-assessed income tax receipts. City economists had forecast borrowing of almost £12bn.
UK economic recovery continues for fifth month
Britain’s economy grew for a fifth month in June as the reopening of indoor hospitality and visits by patients to their GPs helped boost national output by 1%, according to official figures. The main driver of growth in the second quarter was a 7.3% jump in consumer spending, reflecting a rise in activity as government restrictions were relaxed. Gross domestic product remained 2.2% below the level reached before the Covid-19 pandemic in February 2020. However, analysts warned that the pace of recovery probably slowed in July as infection rates rose.
House price growth cools after stamp duty holiday
House price growth cooled in July after the end of the government’s stamp duty holiday in England and Northern Ireland. The latest snapshot from Halifax, Britain’s biggest mortgage lender, showed the price of the average home rose by 0.4% on the month. However, prices had been rising more sharply a year ago, resulting in the annual rate of growth coming down from 8.7% to 7.4% – its lowest level since March. House price growth was strongest in the north of England and Wales, with weaker growth rates in London and the south-east.
Unemployment drops as businesses scramble for workers
Unemployment fell in June as businesses scrambled to hire workers after government pandemic restrictions were relaxed and those made redundant earlier in the crisis returned to work. Official figures showed the unemployment rate dropped to 4.7% in the three months to June, down 0.2 percentage points on the previous quarter. Data for July showed the number of job vacancies passed 1m for the first time on record. The unemployment rate remains higher than pre-pandemic levels, when it stood at about 4%. Annual wage growth jumped to 8.8% including bonuses. However, economists said the figures were heavily distorted by sharp falls in 2020 when millions of workers were on furlough, suggesting a more accurate figure would be closer to 2%.
And another thing we’ve learned this month … Covid and Brexit trigger the worst supply-chain crisis since the 1970s
Britain’s economy has been plunged into the worst supply chain crisis in decades, as shortages of workers and materials because of Covid and Brexit leave shops and restaurants short of goods. Slowing the pace of economic recovery from lockdown, business surveys show companies are struggling with global supply problems and finding difficulty moving products due to shortages of HGV drivers. The issues caused McDonald’s to run out of milkshakes and Nando’s to be short of chicken, while a global shortage of microchips has forced car manufacturers to cut production. Industry surveys from the CBI lobby group show the worst manufacturing supply chain disruption since at least 1977. Retailers’ stock levels have plunged to the lowest since the early 1980s. Labour shortages are affecting advanced economies globally, as supply constraints fail to meet red-hot demand. However, analysts say Brexit barriers are exacerbating problems in the UK.