Delta variant fuels sharp rise in Covid-19 infections

Daily new confirmed coronavirus infections have risen sharply over the past month, fuelled by the Delta variant. The government delayed its plan for relaxing pandemic restrictions in England by four weeks, while countries around the world have launched tougher travel restrictions. The latest figures to 28 June show 22,868 people tested positive for Covid-19 across the UK, the highest level since January. However, vaccines appear to have weakened the link between infections and hospital admissions and deaths. More than 44 million people have had a first shot of a Covid-19 vaccine. More than 32 million have had a second.

Public transport usage rises above pre-pandemic levels

The number of trips taken on public transport has risen above pre-pandemic levels for the first time since Covid-19 spread to the UK. According to Apple mobility data – which records requests made to Apple Maps for directions – bus and train journeys are now 11% higher than levels in January 2020. As the easing of pandemic restrictions and the vaccine programme enables more people to venture away from home and some office workers resume commuting, walking and driving levels have also risen sharply.

Stock markets slip on inflation and Delta variant concerns

Global stock markets have come under pressure in the past month from the double threat of rising inflation and lengthier pandemic restrictions. Financial investors are concerned that a burst of inflation in several large economies will force central banks to raise interest rates. Prolonged Covid-19 restrictions amid the spread of the Delta variant have also weighed on company shares, denting the value of travel firms in particular. The FTSE 100 has dipped in recent weeks from a high of 7,184 in mid-June, slipping to about 7,100, and taking the index of leading UK company shares back to where it started the month.

Bank of England target breached as inflation climbs

UK inflation jumped to 2.1% in May, driven by higher fuel prices, clothing costs and rising prices for meals and pub and restaurant drinks as lockdown restrictions were relaxed. The rise in the consumer prices index (CPI) measure of inflation from 1.5% a month earlier breached the Bank of England’s target rate of 2%, stoking fears over a sustained rise in the cost of living after lockdown. Threadneedle Street expects the strength of Britain’s economic recovery to push inflation above 3% by the end of the year, although believes it will then fade as the post-Covid boom slows down.

Surge in business activity hampered by supply shortages

Britain’s economy surged ahead in June as private-sector businesses secured extra work and created thousands of new jobs, but analysts warned cost pressures were mounting for companies amid labour shortages and continuing disruption to global supply chains. The flash IHS Markit/Cips purchasing managers’ index, a closely watched barometer of private sector activity, fell slightly to 61.7 in June from 62.9 in May. Although there were concerns about rising prices for raw materials, the reading was above the 50 mark that separates expansion from contraction and still among the highest levels since records began in 1998. Growth in the eurozone accelerated. However, the growth rate for private-sector activity in the US and China fell slightly.

Unemployment drops as employers hire staff

Britain’s jobs market is stabilising after UK unemployment fell for the fourth month in a row in April, as businesses took on more staff in response to pandemic controls being relaxed. The unemployment rate fell to 4.7% in the three months to April, representing about 1.6 million people, in a modest improvement from 4.8% in the three months to March. The number of staff on company payrolls rose for a sixth consecutive month, rising by 197,000 to 28.5 million. However, this remains about 500,000 below pre-pandemic levels. Young adults, workers in hospitality and those living in London have borne the brunt of job losses in the past year.

Retail sales fall in May as hospitality reopens

British retail sales fell 1.4% in May from the previous month as consumers returned to pubs and restaurants after the easing of Covid-19 restrictions, leading to a drop in spending on food in supermarkets. However, the dip followed an exceptionally strong April, while household goods stores and garden centres continued to fare well as people spent money in anticipation of the summer and the lifting of restrictions on outdoor gatherings. Overall, total retail sales remain 9.1% higher than pre-pandemic levels after a boom in online shopping during lockdown, but in-store sales remain 1.3% lower.

Economic recovery boosts government tax take

The government’s budget deficit – the difference between expenditure and income – was lower than expected in May as the reopening of the economy prompted a rush to the shops and pushed VAT and fuel duty receipts higher. Official figures showed the deficit was £24.3bn, undershooting the £28.5bn estimate from the Office for Budget Responsibility (OBR) by £4.2bn. Analysts said the stronger-than-expected economic rebound was on course to hand Rishi Sunak a £30bn windfall compared with the OBR’s forecast for the current financial year.

Easing of pandemic restrictions boosts economic growth

The UK economy grew for a third consecutive month in April as the easing of Covid-19 lockdown measures fuelled a rebound in consumer spending. Official figures show GDP rose by 2.3% in April, the fastest pace since July 2020, amid a rise in spending in shops, bars and restaurants, as well as a pickup in bookings for caravan parks and holiday lets. Growth of 2.3% in April followed 2.1% growth in March and 0.4% growth in February, after the economy performed better than expected during the national lockdown at the start of the year. However, further ground remains to be recovered, with the economy still about 4% below its pre-pandemic level.

House prices soar amid stamp duty holiday

House prices continued to rise sharply in May as buyers rushed to take advantage of the government’s stamp duty holiday before it is gradually phased out from the start of July. The latest snapshot from Halifax, Britain’s biggest mortgage lender, showed the average price of a UK home rose by 1.3% in May, taking the average selling price to a record £261,743. Halifax said almost £22,000 had been added to the average house price since May 2020, when the UK went through the first easing of national lockdown restrictions. It marks a 9.5% annual increase, the fastest rate of growth in seven years.

And another thing we’ve learned this month … worker shortages risk undermining economic recovery

Businesses across the UK are struggling with staff shortages as lockdown measures are relaxed, in a development employers’ groups say could endanger the economic recovery from Covid-19. Office for National Statistics figures compiled using adverts from the recruitment website Adzuna show the total volume of online job adverts is substantially higher than pre-pandemic levels, at 129% of its February 2020 average. Roles in hospitality, transport and warehousing are under particular pressure, with logistics organisations warning that chilled food will struggle to reach some shops this summer because of a lack of drivers and production workers. Some economists say shortages will lead to rising wages, pushing up prices of goods and services for consumers. Business leaders are calling for looser post-Brexit immigration rules amid a decline in EU jobseekers in the UK. Some politicians blame the furlough scheme, with almost 2 million workers still temporarily away from their jobs and receiving emergency wage support from the state. But others say employers should offer higher pay to lure new recruits.