talking trade

economic Snap Snapshot

Economic Snapshot Covid-19 has had a huge impact on the UK economy, with GDP in August still 12 per cent below February levels. However, BHETA members can take heart from the statistics linked to the home & DIY which are performing much better than most, with Kingfisher and Dunelm leading the way. There was a positive return to year-on-year retail sales value growth in August, particularly in the household sector, strong exporting numbers reported in the PMI particularly in Asia, and the mortgage approvals number recovered in July.

Retail Sales In August, retail sales values were back up above last year for the first time since February. Volumes increased by 0.8 per cent versus July; this is the fourth consecutive month of growth, resulting in an increase of 4 per cent when compared with February’s pre- pandemic level. Spending in household goods stores was up by 9.9 per cent versus February.

Gross Domestic Product (GDP) Monthly gross domestic product grew by 6.6 per cent in Jul as lockdown measures continued to ease, following growth of 8.7 per cent in June and 2.4 per cent in May and a record fall of 20 per cent in April. July GDP is now 18.6 per cent higher than its April low. However, it remains 111.7 per cent below the levels seen in February 2020, before the full impact of the coronavirus pandemic.

Mortgage Approvals The number of mortgages approved for house purchase in the United Kingdom jumped to 66,300 in July 2020, recovering

October 2020

further from May’s all time low of 9,300 and easily beating market expectations of 54,800.

Construction Output Monthly construction output grew by 17.6 per cent in July, following the record monthly growth of 23.5 per cent in June; the level of construction output in July was 11.6% below the February level. Construction output fell by 10.6 per cent in

the three months to July, compared with the same previous three-month period. This was driven by falls in both new work (9.7 per cent), and repair and maintenance (12.4 per cent); the largest negative contributor was private new housing, which fell by 17 per cent.

Purchasing Managers Index The HIS Markit/CIPS PMI fell to 54.3 in September, from 55.2 in August which was the strongest reading since February 2018. Export sales were a bright spot, partly helped by rising demand from clients in Asia. In contrast to the downward trend in business optimism across the private sector, manufacturing companies indicated that confidence held steady.

UK House Price Index UK average house prices increased by 3.4% over the year to June 2020, up from 1.1% in May 2020. Average house prices increased by 3.4%

over the year to June 2020, up from 1.1 per cent in May 2020. Average house prices increased over the year in England to £254,000 (3.5 per cent), Wales to £168,000 (2.8 per cent), Scotland to £157,000 (2.9 per cent) and Northern Ireland to £141,000 (3 per cent).

Consumer Price Index The Consumer Prices Index 12-month inflation rate was 0.5% in August, down from 1.1 per cent in July 2020. The largest contribution came from recreation and culture (0.35 percentage points). Falling prices in restaurants and cafes, arising from the Eat Out to Help Out Scheme, resulted in the largest downward contribution (0.44 percentage points) to the change since July.

Reuters FX Analysis The pound has lost 4.5 per cent so far in September versus the dollar, making this pound’s worst month since 2016. Against the euro the pound is down to 1.09 Eur against 1.11 in August.

1GBP = 1.09 EUR 1GBP= 1.27 USD

Labour Market Early indicators for August suggest the number of employees on payrolls was down around 695,000 compared with March. While redundancies were still historically low, both the quarterly and annual changes are the largest seen since 2009. The number of people estimated to be temporarily away from work (including ‘furloughed’, has fallen, but it was still more than 5 million in July, with over 2.5 million of these being away for three months or more.

Commodity Prices Both energy and non-energy commodity prices continued to surge in August, rising 5.3 per cent and 4.0 per cent respectively. | 17

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