UK economy rebounds as hopes grow for end to Covid crisis | Economics

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Coronavirus infections fell during lockdown

The number of daily new confirmed coronavirus infections has continued to fall in the past month. With a gradual easing of restrictions this spring, the seven-day average for the number of deaths within 28 days of a positive Covid-19 test has fallen substantially, from almost 1,300 in early January to 17 on 27 April. Almost 34 million people have had a first shot of a Covid-19 vaccine. Almost 13 million have had a second. However, infection rates have soared in India amid the emergence of a new variant, raising concerns over the pandemic intensifying further. Cases also remain higher in the EU.

Transport usage grows as lockdown relaxed

The number of trips taken on UK roads and public transport has increased to the highest levels since summer 2020 in the past month, in a sign that more people are starting to leave their homes after lockdown measures were relaxed. According to Apple mobility data – which records requests made to Apple Maps for directions – bus and train journeys are getting closer to pre-pandemic levels. Walking and driving is significantly higher.

Stock markets rally on hopes for economic recovery

The FTSE 100 has rallied sharply in the past month amid hopes for a faster economic recovery from the Covid-19 pandemic, as several countries ease lockdown measures and governments continue to provide billions of pounds of emergency support. The blue-chip index has gained more than 200 points since the start of April, with firms most likely to benefit from the reopening of the economy rising most – including retail, travel, leisure and tourism firms. Reflecting growing optimism over the global economic recovery, the index of leading UK company shares rose above the 7,000 mark on 16 April. However, concerns over the Indian variant have put the brakes on the stock market rally in recent days, with the FTSE 100 falling back to just below 7,000.

Inflationary pressures start to build

UK inflation rose in March, driven by the higher cost of petrol and clothes, in a signal that prices are moving to an upward trajectory as the economy recovers. The Office for National Statistics (ONS) said the consumer prices index (CPI) increased to 0.7% last month, up from 0.4% in February. Economists expect inflation to rise further after lockdown amid a burst of pent-up demand for goods and services, fuelled by £180bn in additional savings built up by mainly wealthier households. However, in a sign of continuing pressure on the economy, inflation remains below the Bank of England’s 2% target rate.

Business activity booms as economy reopens

The partial reopening of the UK economy led to the fastest private sector growth for almost eight years, according to closely watched surveys. As lockdown measures are relaxed, business activity has picked up sharply thanks to pent-up demand for goods and services. The flash IHS Markit/Cips purchasing managers’ index jumped to 60.0 in April from 56.4 in March, significantly above the 50 mark that divides expansion from contraction. Separate figures from the CBI industrial trends survey shows optimism among manufacturers has reached the highest levels since 1973. With higher new daily Covid infections on the continent, the eurozone economy remains subdued. Private sector activity has hit a record high in the US as the world’s largest economy stages a rapid recovery. Growth has also accelerated in China.

Unemployment falls but millions remain furloughed

Unemployment in the UK fell for a second month in February despite the Covid-19 lockdown, as employers stepped up preparations for the easing of restrictions. The unemployment rate fell to 4.9% in the three months to February, representing about 1.7 million people, in a modest fall from 5% in the three months to January. Raising hopes for a lower peak in unemployment, official figures showed strong growth in online job adverts, rising back to pre-pandemic levels. However, almost 5 million people remained furloughed. Job losses are expected to rise once the scheme is made less generous in July and closed completely in September.

Retail sales rise as consumers prepare for reopening

British retail sales rose by 5.4% in March – a month in which there was only a modest relaxation of coronavirus restrictions – as consumers ramped up spending after the government announced its roadmap for unlocking the economy. Sales of clothes rose as consumers anticipated the chance to go out again, increasing by more than 17% on the month. The easing of travel restrictions towards the end of the month also led to an 11% increase in fuel sales. Helped by consumers spending on physical goods while travel, hospitality and leisure remained largely off limits, overall retail sales were 1.6% higher in March than they were before the pandemic began to have an impact on the economy in February 2020.

Public borrowing soars to peacetime record

The government’s budget deficit – the gap between spending and income – soared to a peacetime record of £303bn to combat Covid-19 in the first full financial year of the crisis, but the total was lower than originally feared. Despite a £28bn shortfall in March, the ONS said the deficit for the 2020-21 year was £24bn less than the £327bn pencilled in at the time of the budget by the Office for Budget Responsibility (OBR). The national debt – the sum total of every deficit – has reached £2.14tn, almost 98% of GDP. Rishi Sunak, the chancellor, has said “hard choices” must be taken to balance the books. But economists warn austerity could derail the UK’s economic recovery.

Economy returns to growth as EU trade recovers

The UK economy returned to growth in February despite pressure from continuing government Covid restrictions, as businesses adapted to lockdown and EU exports staged a partial recovery. Gross domestic product (GDP) rose by 0.4% from a month earlier, after a revised drop of 2.2% in January. Retailers recorded a pickup in sales, car production fuelled growth in the manufacturing sector, and construction grew strongly. However, the economy remains 7.8% smaller than in February 2020 before the pandemic struck. UK exports of goods to the EU recovered after a record plunge during January amid intense border disruption in the first month since Brexit, with growth of 46.6% on the month.

House prices return to growth after stamp duty extension

UK house prices resumed an upward trajectory in March after Sunak used the budget to announce an extension in the stamp duty holiday until the end of June. The property market was cooling as the original deadline at the end of March approached, following a boom in house prices last year fuelled by the tax break. However, the latest snapshot from Halifax, Britain’s biggest mortgage lender, showed the average price of a UK home jumped by 1.1% in March to a record high of £254,606 after the chancellor confirmed the extension. Since March 2020, house prices have risen by 6.5%, or £15,430 in cash terms.

And another thing we’ve learned this month … Retail footfall soars in England and Wales as non-essential shops reopen

Footfall on high streets and shopping centres has risen sharply in England and Wales after the reopening of non-essential shops and hospitality venues, reflecting pent-up consumer demand after more than three months of lockdown. According to Springboard, in the week to 17 April 2021, overall retail footfall in the UK increased by 31 percentage points from the previous week, climbing to 75% of the level seen in the equivalent week of 2019. Separate figures from the British Retail Consortium showed the biggest gains were in cities such as Portsmouth, where footfall was up more than 1,000%, and Manchester, Leeds, Liverpool and Birmingham – all up more than 300%. Throughout the pandemic retail parks – with more outside space for social distancing – have recorded the strongest performance.

Hafta Ichi
Source: The Guardian
Keyword: UK economy rebounds as hopes grow for end to Covid crisis | Economics

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