What’s next for the economy?

Economic Week In Review | Issue 238 | 20 July 2020

Employment

Employment levels fell by 649,000 (-2.3%) during lockdown, according to the latest figures from the ONS PAYE figures. The unemployment figure has not
seen a huge increase due to furlough, therefore economists have warned that Covid’s full effect on the jobs market will not be seen until October, when the
scheme ends.

Employment losses were greatest in April (-1.6%), however monthly growth has been negative since February.

 

UK News

  • Consumer inflation increased slightly to 0.6% in June whilst a poll of
    economists had expected it to fall to 0.4%. Core inflation for less volatile
    elements rose by 1.4%. The large shutdown of the economy has hindered the
    index recently as some items have been unavailable.
  • GDP | The UK economy grew by 1.8% in May. Whilst it is encouraging to see
    a positive figure, the economy is substantially smaller than at the beginning
    of the year and therefore needs larger figures to account for a recovery. The
    impact of reopening of non-essential shops should show in next month’s
    figures.
  • Immigration | The Government released its latest guidance on a points-based
    system which confirms several specialist trades have been included on the
    Tier 2 ‘skilled worker’ list, but many more trades have not. The document also
    confirms fee levels which need to be paid as a license fee and an Immigration
    Skills Charge.

Global News

  • Recovery in China | Exports from and imports to China showed an annual
    increase in June suggesting that the world economy is improving despite
    coronavirus still being active to varying degrees around the world. Despite
    June’s positivity, figures in China are still depressed for the first half of 2020.

Materials and commodities

  • Material delays | Producers are “playing catch-up and haven’t caught up” with
    renewed demand, according to the Builders Merchants Federation. Supply is
    also being hindered by a lack of pallets as Scottish sawmills were closed. The
    CLC’s Product Availability Group has been meeting weekly to try and resolve
    pinch points.
  • Tata steel is looking to replace its blast furnaces at Port Talbot with electric
    arc furnaces in an attempt to reduce carbon emissions. It is currently trying
    to obtain a government support package under which it will have to lower
    emissions and protect jobs.

Construction and property news

  • Groundworkers | Demand for groundworkers is now above the pre-lockdown
    peak, according to analysis by Hudson Contract who suggest that it points to
    a V-shaped recovery.
  • Gigafactory | Start-up company Britishvolt is to start construction on the UK’s
    first large-scale gigafactory at a former RAF base near Cardiff airport. The
    £1.2bn investment will provide batteries for electric cars.
  • Future of mobility | The Mineral Products Association, whose members
    generally deliver building materials in large lorries have voiced concerns over
    plans to legalise e-scooters stating that they are less visible and less stable
    than cyclists.
  • Furlough levels in construction have fallen from a peak of 40% at the end of
    April to 21% at the end of June.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE100 6,290.30 3.20 -16.23
FTSE250 17,321.29 0.82 -11.72
Nikkei 22,696.42 0.08 5.73
CSI 300 4,544.70 -4.39 19.35
S&P 500 3,224.73 1.25 8.34
Nasdaq 10,503.19 -1.08 28.93
CAC 40 5,069.42 1.99 -8.70
Dax 12,919.61 2.26 5.38
$ per £ 1.2548 -0.82 0.42
€ per £ 1.0971 -1.87 -1.49
Gold £/oz 1,440.71 1.11 26.37
Brent Oil $/barrel 43.14 -0.23 -30.94

Weekly Summary

The markets and general sentiment improved last week as economies continued to open up as well as being boosted by indications that a vaccine for Covid-19 could be on the horizon. However, the virus is still prevalent and increasing in several parts of the world and as such we cannot afford to be complacent.

There are legitimate concerns over the strength of labour markets around the world as furlough schemes are set to wrap up in the not too distant future, possibly disrupting any recovery that may be
happening.

Flash PMI updates for the United States, Europe, Japan, and the UK will be released towards the end of the week and will no doubt be keenly anticipated and scrutinised for signs of a recovery. Last month PMI
generally rose to near, but still below, the 50.0 marker.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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