Rising number of coronavirus infections slows UK economic recovery in July


Coronavirus Economic Impact Update

A closely watched survey showed that the increase in coronavirus infections caused the growth of economic activity in the UK to slow to a four-month low in July due to the Covid disruption that affected customer demand and caused staff shortages.

Chris Williamson, chief business economist at IHS Markit, said that the UK’s recent economic growth has been “stifled by the rising wave of viral infections, which has curbed customer demand, disrupted the supply chain and caused widespread staff shortages”.

He added that as economic activity is about to accelerate, it seems unlikely that the infection “casts a shadow” on the prospects for recovery.

The preliminary or mid-term comprehensive Purchasing Managers Index (PMI), which tracks the health of the service and manufacturing industries, fell from 62.2 in the previous month to 57.7 in July.

The headlines in the UK are far below the Eurozone, which is the fastest activity in 21 years, and below the 61.7 forecast by economists surveyed by Reuters.

According to the results of interviews conducted by the research team IHS Markit and the Chartered Purchasing and Supply Association (Cips) from June 12 to 22, the manufacturing and service industry indexes both fell to four-month lows.

ING Bank economist James Smith said that the July data “suggests that the economic recovery has stalled with the increase in Covid-19 cases”.

The company said that as new work orders slowed to the lowest level in a five-month growth period, the pandemic has led to a decline in business and consumer confidence.Other groups continue to report BrexitThe report stated that there were difficulties associated with export sales.

At the same time, as companies struggle to handle the unusually large number of employee turnovers and fill vacancies, employment growth has fallen to its lowest level since March.

Cips Group Director Duncan Brock said: “Severe material and personnel shortages in certain industries interrupted the pace of recovery in the private sector, as signs of weakness have affected output, new orders and business optimism.”

Companies are also struggling to cope with rising costs. Driven by rising wages, rising transportation costs, and rising supplier prices, the corresponding index has risen at the fastest rate since the survey began in 1998.

“The July survey generally strengthened expectations of higher inflation,” said Martin Baker, senior economic adviser to the Ernst & Young Project Club.

At the same time, the latest data from the National Bureau of Statistics show that retail sales from May to June increased by 0.5%, which was due to European Football Championship 2020.

The line chart of the United Kingdom, 2018=100 shows that retail sales have improved in June

Sales at non-food stores fell by 1.7% in July, the first decline since January.

According to the National Bureau of Statistics of the United Kingdom, this trend is caused by an 11% drop in household goods, which may be related to the shortage of items such as furniture and electrical products after shipping delays.

After two consecutive months of growth, apparel sales fell by 5% in June.

Research firm GfK said on Friday that the good news is that consumer confidence rose to pre-pandemic levels in July.

However, economists warn that this may not be enough to support retailers and spending rebound, especially as prices continue to rise and government employment and income support gradually disappear in the fall.

Hugh Gimber, global market strategist at JP Morgan Chase Asset Management, advised members of the Bank of England’s Monetary Policy Committee to pay attention to “growth downside risks” before meeting next month.

“Even if the inflation rate will rise in the next few months, we expect the central bank to be wary of tightening policies too quickly, as this may hinder a recovery that is still in its infancy.”



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