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The recovery from the Covid-19 lockdown continues with August retail volumes 5.5% higher than pre-pandemic February. Whilst the wider economy is still in a weakened state, statistics linked to spending on the home have been resilient, with average UK house prices achieving a new record high in September of £239,000. Unemployment is the major challenge and could become a drag on consumer spending.
Retail Sales In September, retail sales volumes increased by 1.5% when compared with August; this is the fifth consecutive month of growth, resulting in an increase of 5.5% when compared with February’s pre- pandemic level. The proportion of online sales was at 27.5%, compared with 20.1% reported in February.
Gross Domestic Product (GDP) GDP grew by 2.1% in August, the fourth consecutive monthly increase, but it remains 9.2% below the February level. Highlights include the retail trade, which grew by 17.9% as a result of strong growth in non-food stores and a record proportion of online sales. (ONS 9th October)
Mortgage Approvals The number of mortgages approved for house purchase in the United Kingdom jumped to 84,700 in August, easily beating forecasts of 71,000, as the market continued to show more signs of recovery. This was the highest number of approvals since
November/December 2020
October 2007 but it only partially offset weakness seen between March and June.
Construction Output Monthly construction output growth slowed to 3.0% in August 2020, following record monthly growth of 21.8% in June 2020 and growth of 17.2% in July 2020. The level of construction output in August 2020 remains 10.8% below the February 2020 level.
Purchasing Managers Index The IHS Markit/CIPS UK Manufacturing PMI was revised lower to 54.1 in September 2020, from a preliminary estimate of 54.3 and compared with August’s two- and-a-half year high of 55.2. The latest reading pointed to a fourth consecutive month of growth, its longest sequence in expansion territory since early-2019.
UK House Price Index Average UK house prices hit their highest ever level at £239,000 in August. Average house prices increased by 2.5% over the year to August 2020, up from 2.1% in July. Average house prices increased
over the year in England to £256,000 (2.8%), Wales to £173,000 (2.7%), Scotland to £155,000 (0.6%) and Northern Ireland to £141,000 (3.0%).
Consumer Price Index
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was
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0.7% in September 2020, up from 0.5% in August 2020.
Reuters FX Analysis The pound was worth $1.30 on 28 October, which is around the the average exchange rate since the European referendum. Against the euro, the pound is at 1.10 Eur, which is at the low end of the ‘new normal’ since the Euro referendum, which has fluctuated between 1.08 and 1.20
1 GBP = 1.10 EUR 1 GBP = 1.30 USD
Labour Market The UK unemployment rate increased to 4.5% in the three months to August from 4.1% in the previous period and above market expectations of 4.3%. It was the highest jobless rate since the three months to May 2017. For June to August, an estimated 1.52m people were unemployed, up 209,000 on the year and up 138,000 on the quarter. The number of people temporarily away from work rose to almost 7.3m people in April to June but has fallen to 6.4 million people in June to August.
Commodity prices Commodity prices were mixed in September, with energy prices falling 5.1% and non-energy commodities rising 2.4%. While metal commodities have recouped their losses from the Covid pandemic, energy prices are expected to stabilize below pre- pandemic levels next year.
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