Gradual decline in Covid-19 cases
Daily new coronavirus infections have steadily fallen from a peak in April and have remained well below 1,000 per day since early June. However, some areas are recording more infections than others, leading to local lockdowns – such as in Leicester and Oldham.
The World Health Organization has said the spread of the virus is still accelerating globally. Cases are rising again in some European countries, including Spain, leading to quarantine restrictions on travellers arriving in Britain. In the UK, as of 28 July, there have been 300,692 cases of coronavirus confirmed, and 45,878 deaths associated with the virus in total.
Driving returns to pre-Covid-19 levels
Driving on Britain’s roads has returned to pre-lockdown levels, as restrictions are gradually relaxed nationwide. However, the UK is far behind other European countries, in a reflection of higher infections and a slower recovery rate. Apple mobility data – which records requests made to Apple Maps for directions – shows driving is up by 18% compared with January. However, public transport use remains 38% down and is taking much longer to rise because of the continuing risks to health. In Germany and France, driving and public transport use is significantly above pre-covid levels.
Stock markets hold steady
Financial markets around the world have recovered from the deep plunge in March at the onset of the health emergency. Hopes for a vaccine have pushed up markets in the past month, although fears over a renewed wave of infections in some countries, and a slower economic recovery than anticipated, have also weighed on stocks. The FTSE 100 has fallen slightly in the past month to trade at just below 6,150 – but broadly the same level as where the index of leading UK company shares began the month.
Games consoles drive up inflation
UK inflation rose unexpectedly in June for the first time this year, fuelled by the rising price of games consoles during lockdown and a lack of summer sales on the high street. The consumer price index (CPI) measure of inflation increased to 0.6% in June from 0.5% in May. Despite the increase, economists said the rise would probably not be the start of a sustained rise in inflation, as rising job losses and weaker consumer demand are likely to force businesses to cut their prices.
Business activity rapidly recovers
Hopes of a rapid recovery in Britain’s economy have been boosted by a sharp rise in business activity in July, helped by the release of pent-up demand. In the UK, the purchasing managers’ index, compiled from business surveys by IHS Markit and the Chartered Institute of Procurement and Supply, rose to 57.1 in July – a 61-month high – up from 47.7 in June. A reading above 50 indicates expansion. Growth also accelerated in the eurozone and China. However, business activity remained subdued in the US, as the country continues to struggle with Covid-19 infections. The US PMI rose to 50 – a six-month high – although activity has yet to return to growth territory.
Paid employment falls sharply
The impact of Covid-19 on employment is starting to be felt, as the number of employees on company payrolls fell by 649,000 between March and June. However, with as many as 9.5 million people on furlough, the official unemployment rate remained unchanged at 3.9% – reflecting the success of the government support so far. Economists have however said the end of the furlough scheme in October will cause a sharp rise in job losses. The government’s economics forecaster, the Office for Budget Responsibility, estimates unemployment will more than double by the end of the year to the highest levels since the 1980s.
Retail sales rise as high street reopens
The reopening of non-essential shops helped drive up retail sales by 13.9% in June compared with May, pushing overall sales close to pre-pandemic levels. Online spending, DIY and food sales fuelled the increase. However, sales did not rise across the board, with clothing sales remaining depressed. According to the Office for National Statistics, non-food sales are still about a third below pre-pandemic levels.
Public borrowing hits quarterly record
The government’s emergency tax and spending measures to cushion the financial blow from Covid-19 led public borrowing to increase by a record £128bn in the three months to June, more than double the amount for the whole of last year. The chancellor, Rishi Sunak, said he would need to make “tough decisions” to repair the public finances in a comprehensive spending review – launched this month and due to be completed by the autumn. However, economists said the government should take advantage of record low borrowing costs to invest in the economic recovery – and steer away from raising taxes or cutting spending.
Growth returns more slowly than expected
The British economy returned to growth more slowly than expected in May in the first month of lockdown controls being relaxed, dashing hopes for a rapid rebound from the pandemic. Gross domestic product (GDP) rose by 1.8%, as the economy staged a modest recovery from April, when GDP crashed by a fifth. City economists had expected a rise of 5.5%. Over the three months to May, the sharpest declines in economic activity were recorded in the food and drink sector, with output plunging by 69% due to the closure of bars and restaurants.
House price fall prompts stamp duty cut
Rishi Sunak launched an immediate stamp duty cut to revive Britain’s housing market as prices fall across the country for the first time in eight years. According to the latest snapshot from Halifax, Britain’s biggest mortgage lender, house prices fell for a fourth month in a row in June. Despite covering the first full month of estate agents being allowed to open for business again after lockdown, the average cost of a home fell by 0.1%. Mortgage applications have however begun to rise, in a sign of increasing interest in moving home as restrictions are eased.
And another thing we’ve learned this month … households have suffered severe damage to their finances
British households have suffered the biggest hit to their finances since the oil crisis of the mid-1970s, as the pandemic threatens to cause widespread financial hardship. According to the Resolution Foundation, average household income fell 4.5% in May compared with March, before the crisis struck. It said the damage surpassed the 2008 financial crisis, and was the worst decline since 1974-75, caused by the spike in inflation after the 1973 oil crisis.
The thinktank said the government’s support schemes stopped the impact from being greater, and said poorer households in particular had been supported. However, it warned of a likely surge in unemployment this winter as the furlough scheme is closed could trigger further sharp falls in household income later this year.