{"id":1130,"date":"2022-08-10T08:45:50","date_gmt":"2022-08-10T07:45:50","guid":{"rendered":"https:\/\/new.contentdeployment.co.uk\/quilter\/?p=1130"},"modified":"2022-08-10T08:45:53","modified_gmt":"2022-08-10T07:45:53","slug":"economic-review-july-2022","status":"publish","type":"post","link":"https:\/\/new.contentdeployment.co.uk\/quilter\/2022\/08\/10\/economic-review-july-2022\/","title":{"rendered":"Economic Review – July 2022"},"content":{"rendered":"
\n

UK economy expands in May<\/strong><\/p>\n<\/div>\n\n

\n

The latest gross domestic product statistics show that the UK\neconomy unexpectedly grew in May although forward-looking indicators still\npoint to a deteriorating outlook.<\/strong><\/p>\n<\/div>\n\n

\n

Figures released last month by the Office for National Statistics\n(ONS) revealed that the economy returned to growth in May after contracting\nduring April. In total, UK economic output rose by 0.5% across the month,\nsignificantly exceeding the consensus forecast from a Reuters poll of\neconomists which had predicted zero growth.<\/p>\n<\/div>\n\n

\n

ONS said the main sectors of the economy all expanded during May\nincluding construction, travel and manufacturing. The data also revealed\nsignificant growth within health services as one of the key drivers of growth\nduring the month.<\/p>\n<\/div>\n\n

\n

In spite of May\u2019s rebound, analysts still expect the economy to\ncome under increasing pressure in the coming months as the cost-of-living\nsqueeze weighs heavily on households\u2019 ability to spend. Recent survey evidence\nalso points to weaker growth, with July\u2019s preliminary headline reading of\nS&P Global\u2019s Purchasing Managers\u2019 Index recording the weakest rise in UK\nprivate sector business activity for 17 months.<\/p>\n<\/div>\n\n

\n

Commenting on the findings, S&P Global Market Intelligence\u2019s\nChief Business Economist Chris Williamson said, \u201cEconomic growth slowed to a\ncrawl in July, registering the slowest expansion since the lockdowns of\nearly-2021.\u201d <\/em>And he added, \u201cForward-looking indicators suggest worse is\nto come.\u201d <\/em><\/p>\n<\/div>\n\n

\n

The latest economic forecasts from the International Monetary Fund\nsuggest the global economy is also facing \u2018an increasingly gloomy and\nuncertain outlook\u2019<\/em>. The international soothsayer now predicts global growth\nwill slow from 6.1% last year to 3.2% in 2022 and 2.9% in 2023, downgrades of\n0.4 and 0.7 percentage points from April\u2019s projections. The UK is expected to\nbe particularly hard hit, with growth next year forecast to be just 0.5%, the\nweakest among the G7 nations.<\/p>\n<\/div>\n\n

\n

Inflation\n<\/strong>at<\/strong> <\/strong>4<\/strong>0-year high<\/strong><\/p>\n<\/div>\n\n

\n

Official statistics show consumer prices are\nrising at their fastest rate in four decades fuelling expectations of another\nbase rate hike when the Bank of England (BoE) concludes its next monetary\npolicy meeting in early August. <\/strong><\/p>\n<\/div>\n\n

\n

ONS data released last month revealed that the UK\u2019s headline rate of inflation rose\nto 9.4% in June, the highest recorded level since\nFebruary 1982. This was up from the previous month\u2019s rate of 9.1% and slightly\nhigher than analysts\u2019 expectations. <\/p>\n<\/div>\n\n

\n

Motor fuels and food were the\nbiggest upward contributors to June\u2019s figure. ONS said average petrol prices\nrose by 18.1p per litre, the largest monthly increase since records began in\n1990, while the cost of milk, cheese and eggs all climbed sharply and the price\nof vegetables, meat and ready meals also rose notably.<\/p>\n<\/div>\n\n

\n

The jump in inflation increased\nthe chances of a sixth successive rate hike when the BoE\u2019s Monetary Policy\nCommittee (MPC) next convenes. The MPC is due to announce its decision on 4\nAugust, with speculation of a half percentage-point rise intensifying following\nrecent comments by the Bank\u2019s Governor Andrew Bailey. <\/p>\n<\/div>\n\n

\n

During a Mansion House speech the day\nbefore June\u2019s inflation data was released,\nMr Bailey reiterated that the MPC is\nready to \u201cact forcefully\u201d<\/em> if it\nsees signs of greater inflation persistence. \u201cIn simple terms, this means\nthat a 50 basis point increase will be among the choices on the table when we\nnext meet,\u201d<\/em> Mr Bailey said.<\/p>\n<\/div>\n\n

\n

However, the Governor also made it clear that such a rise was \u201cnot\nlocked in\u201d<\/em>. And a Reuters poll published\ntowards the end of July suggests the MPC\u2019s decision will be an extremely close\ncall, with just over half of the economists surveyed predicting\na 25 basis point rise and the remainder\nall saying they expect\na 50 basis point hike.<\/p>\n<\/div>\n\n

\n

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

\n

Global stocks have rebounded from\na poor first half of 2022, as easing rate rise expectations and upbeat earnings\nfrom big tech groups fuelled a broad rally. <\/p>\n<\/div>\n\n

\n

US stocks extended\ntheir July rebound on the final Friday of the month, as positive forecasts from\nApple and Amazon showed the resilience of giant companies in an economic\ndownturn, with hopes of a less aggressive monetary policy boosting sentiment. The tech-focused NASDAQ finished\nthe month up 12.35% on 12,390.69. The Dow closed the month up 6.73%\non 32,845.13.<\/p>\n<\/div>\n\n

\n

London stocks closed the month in\ngreen after another wave of corporate news, as well as a raft of inflation\nindicators in the US and surprise positive GDP releases eased fears of an\nimpending contraction in the eurozone. The FTSE 100 closed July up\n3.54% on 7,423.43, while the midcap-focused FTSE 250 registered a gain of 8.03%. The\nAIM recorded a gain of 5.15% in July. <\/p>\n<\/div>\n\n

\n

In\nJapan, the Nikkei 225 ended July on 27,801.64,\nup 5.34%. The Euro Stoxx 50 closed the month up 7.33% on 3,708.10.<\/p>\n<\/div>\n\n

\n

On the foreign exchanges, sterling closed the month at $1.21\nagainst the US dollar. The euro closed at \u20ac1.19 against sterling and at $1.02\nagainst the US dollar.<\/p>\n<\/div>\n\n

\n

Brent Crude closed the month trading at around $105 a barrel, a drop of 4.0%. Gold is currently trading at around $1,753.40 a troy ounce, a loss of 3.50% on the month.<\/p>\n<\/div>\n\n

\n
\"\"<\/figure><\/div>\n<\/div>\n\n
\n

Real pay in record fall<\/strong><\/p>\n<\/div>\n\n

\n

While\nthe latest batch of labour market statistics revealed another jump in\nemployment levels, the data also showed regular pay is falling at the fastest\nrate on record when taking account of inflation. <\/strong><\/p>\n<\/div>\n\n

\n

According to figures released by ONS, the number of people in\nemployment rose by 296,000 in the three months to May, the largest increase\nsince the June to August period last year. The data also revealed that the\nunemployment rate held steady at 3.8%, while job vacancies continued to rise\nalbeit at a slower pace than in previous months. <\/p>\n<\/div>\n\n

\n

The figures also showed that average weekly earnings excluding\nbonuses rose at an annual rate of 4.3% in the three months to May, a slight\nincrease on the previous three-month period. However, once adjusted for\ninflation, basic pay packets actually shrank, with the average wage now worth\n2.8% less than a year ago \u2013 the largest fall in real pay levels since records\nbegan in 2001.<\/p>\n<\/div>\n\n

\n

A significant disparity in private and public sector earnings\ngrowth was also reported across the March to May period. While the annual\naverage total pay growth figure for the private sector was 7.2% (before taking\naccount of inflation), the comparable public sector figure was just 1.5%.<\/p>\n<\/div>\n\n

\n

Government\ndebt costs <\/strong>soar<\/strong><\/p>\n<\/div>\n\n

\n

The latest public sector finance statistics show that the sharp rise in inflation has pushed interest payments on UK government debt up to record levels.<\/strong><\/p>\n<\/div>\n\n

\n

ONS data released last month showed that\ndebt interest payments jumped to \u00a319.4bn in June, more than\ndouble the previous monthly record figure.\nGovernment borrowing totalled \u00a322.9bn overall, \u00a34.1bn higher than the same month last year and\nthe second-highest June figure ever recorded. <\/p>\n<\/div>\n\n

\n

The large increase in\ndebt servicing costs is being driven by the impact of\nhigher inflation on index-linked\ngilts. Interest paid on such debt rises in line with the Retail Prices Index which hit 11.8%\nin June and, with inflation expected to continue rising in the coming months, interest payments are expected to remain at relatively high levels.<\/p>\n<\/div>\n\n

\n

June\u2019s data also pushed borrowing\nfurther ahead of the Office for Budget Responsibility\u2019s (OBR) most recent\nforecast. The fiscal year-to-date budget deficit now stands at \u00a355.4bn, \u00a33.7bn\nhigher than the OBR forecast at the time of the March Budget. Earlier last\nmonth, as part of its fiscal risks and sustainability report, the OBR warned\nthat UK debt is on an \u2018unsustainable path in the long term\u2019<\/em> unless\nspending is tightened and taxes are raised.<\/p>\n<\/div>\n\n

\n

It is important to take\nprofessional advice before making any decision relating to your personal\nfinances. Information within this document is based on our current\nunderstanding and can be subject to change without notice and the accuracy and\ncompleteness of the information cannot be guaranteed. It does not provide\nindividual tailored investment advice and is for guidance only. Some rules may\nvary in different parts of the UK. We cannot assume legal liability for any\nerrors or omissions it might contain. Levels and bases of, and reliefs from,\ntaxation are those currently applying or proposed and are subject to change;\ntheir value depends on the individual circumstances of the investor. No part of\nthis document may be reproduced in any manner without prior permission.<\/strong><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

UK economy expands in May The latest gross domestic product statistics show that the UK economy unexpectedly grew in May although forward-looking indicators still point to a deteriorating outlook. Figures released last month by the Office for National Statistics (ONS) revealed that the economy returned to growth in May after contracting during April. In total, […]<\/p>\n","protected":false},"author":12,"featured_media":1131,"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\/1130"}],"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=1130"}],"version-history":[{"count":3,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/posts\/1130\/revisions"}],"predecessor-version":[{"id":1135,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/posts\/1130\/revisions\/1135"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/media\/1131"}],"wp:attachment":[{"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/media?parent=1130"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/categories?post=1130"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/tags?post=1130"},{"taxonomy":"hd_content_source","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/hd_content_source?post=1130"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}