{"id":1068,"date":"2022-07-12T09:33:12","date_gmt":"2022-07-12T08:33:12","guid":{"rendered":"https:\/\/new.contentdeployment.co.uk\/quilter\/?p=1068"},"modified":"2022-07-12T11:04:32","modified_gmt":"2022-07-12T10:04:32","slug":"economic-review-june-2022","status":"publish","type":"post","link":"https:\/\/new.contentdeployment.co.uk\/quilter\/2022\/07\/12\/economic-review-june-2022\/","title":{"rendered":"Economic Review June 2022"},"content":{"rendered":"
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The\nlatest gross domestic product (GDP) statistics show the UK economy unexpectedly\nshrank in April, increasing concerns about future growth prospects.<\/strong><\/p>\n<\/div>\n\n

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Data\nreleased by the Office for National Statistics (ONS) revealed that the economy\nshrank by 0.3% in April following a fall of 0.1% in March; this was the first\ncontraction in two consecutive months since the start of the pandemic. April’s\nfigure was also much weaker than analysts had been expecting, with the\nconsensus forecast from a Reuters poll of economists predicting a growth rate\nof 0.1%.  <\/p>\n<\/div>\n\n

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ONS\nsaid a key driver behind April\u2019s decline was a \u2018significant reduction in NHS\nTest and Trace activity<\/em>.\u2019 It also noted some \u2018common themes\u2019<\/em>\nreported by firms across different industries, with many saying increases in\nthe cost of production and supply chain shortages had affected their business.<\/p>\n<\/div>\n\n

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Commenting\non the UK\u2019s economic outlook the same day as the GDP figures were published,\nCBI Director General Tony Danker said the business group was \u201cexpecting the\neconomy to be pretty much stagnant\u201d<\/em> and that \u201cit won\u2019t take much to tip\nus into a recession.\u201d<\/em><\/p>\n<\/div>\n\n

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More\nrecent survey data from S&P Global\u2019s closely watched Purchasing Managers\u2019\nIndex also suggests the economy is showing signs of stalling. While the\npreliminary headline figure for June was unchanged at May\u2019s 15-month low of\n53.1, the index measuring new orders fell to 50.8, the weakest growth rate for over\na year, with manufacturing order books dipping below the 50.0 growth threshold\nto 49.6. <\/p>\n<\/div>\n\n

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Chris\nWilliamson, Chief Business Economist at S&P Global Market Intelligence said,\n\u201cThe economy is starting to look like it is running on empty. Current\nbusiness growth is being supported by orders placed in prior months as\ncompanies report a near-stalling of demand. Business confidence has now slumped\nto a level which has in the past typically signalled an imminent recession.\u201d <\/em><\/p>\n<\/div>\n\n

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BoE ready to act \u2018forcefully\u2019<\/em><\/strong><\/p>\n<\/div>\n\n

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Last month saw the\nBank of England (BoE) sanction <\/strong>another<\/strong> <\/strong>quarter-<\/strong>point increase in its benchmark interest rate as <\/strong>the Bank<\/strong> continues its <\/strong>efforts<\/strong> to <\/strong>contain<\/strong> the <\/strong>spiralling<\/strong> <\/strong>rate of inflation<\/strong>. <\/strong><\/p>\n<\/div>\n\n

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After its latest meeting held in mid-June, the BoE\u2019s\nnine-member Monetary Policy Committee (MPC) voted by a 6-3 majority to raise\nBank Rate from 1.0% to 1.25%. This was the fifth\nconsecutive meeting at which the MPC had tightened monetary policy and\npushed rates up to their highest level in 13 years.<\/p>\n<\/div>\n\n

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For the second meeting in a row, the three dissenting\nvoices each called for a half-point hike and\nthe minutes to the meeting stressed that the BoE was ready to take \u2018the\nactions necessary to return inflation to the 2% target<\/em>.\u2019 The minutes\nconcluded, \u2018The Committee will be particularly alert to indications of more\npersistent inflationary pressures, and will if necessary act forcefully in\nresponse.\u2019<\/em>  <\/strong><\/p>\n<\/div>\n\n

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BoE\nGovernor Andrew Bailey reinforced this message when speaking\nat a European Central Bank conference in late June.\nMr Bailey said the Bank needed the option of half-point rate rises in order to\naddress inflation and added \u201cthe key thing for us is to bring inflation back\ndown to target and that is what we will do.\u201d<\/em><\/p>\n<\/div>\n\n

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\nWhen announcing last month\u2019s rate rise, the BoE said it now expects\ninflation to peak \u2018slightly above\u2019<\/em> 11% in the autumn. A\nkey driver of this anticipated rise\nwill be higher household energy bills which look set\nto increase sharply in October as a result of Ofgem\u2019s forthcoming\nprice cap review. <\/p>\n<\/div>\n\n

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The\nlatest data released by ONS showed that inflation currently stands\nat a 40-year high. In the 12 months to May, the rate of\ninflation as measured by the Consumer Prices Index, rose\nto 9.1%, up slightly from April\u2019s figure of 9.0%. <\/p>\n<\/div>\n\n

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Markets\n<\/strong>(Data compiled by TOMD)<\/strong><\/p>\n<\/div>\n\n

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As Q2 drew to\na close, <\/strong>growing concerns of a\nglobal economic downturn weighed on major indexes.<\/strong><\/strong><\/p>\n<\/div>\n\n

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In the UK, the FTSE 100 closed the month on 7,169.28, a loss of 5.76%.\nThe FTSE 250 and AIM also recorded monthly losses of 8.58% and 10.20%\nrespectively. The Euro Stoxx 50 closed the month down 8.82% on 3,454.86, as major Eurozone markets prepare for\nthe European Central Bank (ECB) to hike rates in the face of soaring inflation. The Japanese Nikkei 225 ended the month on\n26,393.04, down 3.25%.<\/p>\n<\/div>\n\n

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At the end of Q2, Wall\nStreet declined on the back of weak US GDP figures. With the Federal Reserve also\nlooking at aggressively tightening monetary policy to combat inflation, fears\nof a recession have heightened. A disappointing consumer confidence survey at\nthe end of June also weighed on investor sentiment. The Dow closed the month down 6.71%,\nwhile the technology focused NASDAQ finished down 8.71%. <\/p>\n<\/div>\n\n

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On the foreign exchanges, sterling\nclosed the month at $1.21 against the US dollar. The euro closed at \u20ac1.15\nagainst sterling and at $1.04 against the US dollar.<\/p>\n<\/div>\n\n

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Brent Crude closed the month trading at around $109 a barrel, a loss of 7.55%, its first monthly decline since November, as signs emerge that the US economy is on weaker footing than expected. At month end, the Organization of the Petroleum Exporting Countries and allies (OPEC+) approved an increase in supply for August. Gold is currently trading at around $1,817 a troy ounce, a loss of 2.02% on the month.<\/p>\n<\/div>\n\n

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Real\nregular pay falling<\/strong><\/p>\n<\/div>\n\n

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The latest set of\nearnings statistics showed that basic pay continues to lag the rapidly rising\ncost of living with real regular wage levels falling at the fastest rate in\nmore than a decade.<\/strong><\/p>\n<\/div>\n\n

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ONS\nfigures released last month showed that average weekly earnings excluding\nbonuses rose at an annual rate of 4.2% across the February\u2013April period, the\nsame level reported in the previous month\u2019s release. However, when adjusted for\ninflation, the latest data shows that basic pay packets actually shrank, with\nreal regular earnings down by 2.2% in comparison to year earlier levels.<\/p>\n<\/div>\n\n

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In\ncontrast, growth in employees\u2019 average total pay (which includes bonuses)\nacross the latest three-month period slowed to 6.8%, down from a rate of 7.0%\nbetween January and March. Despite the fall, this measure of pay does still\ncontinue to outstrip price rises, with total pay growing by 0.4% in real terms\nacross the February\u2013April period.<\/p>\n<\/div>\n\n

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Commenting\non the data, ONS Head of Economic Statistics Sam Beckett said, \u201cThe high\nlevel of bonuses continues to cushion the effects of rising prices on total\nearnings for some workers, but if you exclude bonuses, pay in real terms is\nfalling at its fastest rate in over a decade.\u201d<\/em><\/p>\n<\/div>\n\n

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Retailers\nreport fall in sales<\/strong><\/p>\n<\/div>\n\n

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Official retail sales\n<\/strong>statistics<\/strong> show <\/strong>consumers<\/strong> <\/strong>have started to<\/strong> cut back on their shopping as the cost-of-living squeeze\nbites into household budgets.<\/strong><\/p>\n<\/div>\n\n

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The\nlatest ONS data revealed that total retail sales volumes fell\nby 0.5% in May\ncompared\nto April\u2019s level. In addition, the\nprevious estimate of sales growth in April was downgraded to 0.4%\nfrom an original figure of 1.4%, following a review of the\nseasonal adjustments process. <\/p>\n<\/div>\n\n

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ONS\nsaid May\u2019s fall had been driven by weaker food sales, with feedback\nfrom supermarkets suggesting consumers were spending less on their food shop due to\nthe rising cost of living. In total, supermarket sales fell\nby 1.5% in May, while specialist shops such as butchers and bakers\nreported a 2.2% decline.<\/p>\n<\/div>\n\n

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Other\ndata also highlights the darkening consumer mood. GfK\u2019s\nlong-running Consumer Confidence Index, for instance, fell to\n-41 in June, a new record low for the second consecutive month, while the CBI\u2019s\nDistributive Trades Survey points to continuing weakness\nin retail sales growth. The balance of retailers suggesting sales were poor for\nthe time of year fell to -19 in June from zero in May, while the figure anticipating\nthat sales this month will remain below\nseasonal norms was -25.<\/p>\n<\/div>\n\n

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It is important to take professional advice before\nmaking any decision relating to your personal finances. Information within this\ndocument is based on our current understanding and can be subject to change\nwithout notice and the accuracy and completeness of the information cannot be\nguaranteed. It does not provide individual tailored investment advice and is\nfor guidance only. Some rules may vary in different parts of the UK.<\/strong><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

The latest gross domestic product (GDP) statistics show the UK economy unexpectedly shrank in April, increasing concerns about future growth prospects. Data released by the Office for National Statistics (ONS) revealed that the economy shrank by 0.3% in April following a fall of 0.1% in March; this was the first contraction in two consecutive months […]<\/p>\n","protected":false},"author":12,"featured_media":1070,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[32,34],"tags":[],"hd_content_source":[],"_links":{"self":[{"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/posts\/1068"}],"collection":[{"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/comments?post=1068"}],"version-history":[{"count":3,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/posts\/1068\/revisions"}],"predecessor-version":[{"id":1073,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/posts\/1068\/revisions\/1073"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/media\/1070"}],"wp:attachment":[{"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/media?parent=1068"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/categories?post=1068"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/tags?post=1068"},{"taxonomy":"hd_content_source","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/hd_content_source?post=1068"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}