{"id":7944,"date":"2022-09-07T10:33:16","date_gmt":"2022-09-07T09:33:16","guid":{"rendered":"https:\/\/new.contentdeployment.co.uk\/tomd\/2022\/09\/07\/economic-review-august-2022\/"},"modified":"2022-09-07T10:42:27","modified_gmt":"2022-09-07T09:42:27","slug":"economic-review-august-2022","status":"publish","type":"post","link":"https:\/\/new.contentdeployment.co.uk\/tomd\/2022\/09\/07\/economic-review-august-2022\/","title":{"rendered":"Economic Review – August 2022"},"content":{"rendered":"
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Retailers\nreport sales <\/strong>growth<\/strong> <\/strong><\/p>\n<\/div>\n\n

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Online discounts and the hot summer weather have encouraged <\/strong>an uplift in retail\nsales, with the latest official statistics showing a rise in July and survey\ndata pointing to further growth <\/strong>in<\/strong> August and September. <\/strong><\/p>\n<\/div>\n\n

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Data released by the Office for National Statistics (ONS) revealed that total retail sales\nvolumes rose by 0.3% in July; this was the\nfirst increase in three months and confounded economists\u2019 expectations of a\nsmall monthly decline. Growth was largely driven by a surge in online and mail\norder sales, which recorded their sharpest rise since December. <\/p>\n<\/div>\n\n

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July saw\nAmazon hold its annual Prime Day promotion, although ONS did say that greater spending was seen across a number of online retailers, with sales figures boosted by \u2018a range of offers\nand promotions<\/em>.\u2019 The British Retail Consortium also noted that \u2018the summer sunshine\u2019 <\/em>had provided a boost to the figures, with sales\nof \u2018summer clothing, air conditioning appliances and outdoor foods\u2019 <\/em>all\nbenefitting from record temperatures. <\/p>\n<\/div>\n\n

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Evidence\nfrom the latest CBI Distributive Trades Survey also suggests the retail sector enjoyed a further uplift in sales last month, with the net balance of retailers reporting year-on-year sales\ngrowth jumping to +37 in August from -4 in July; this represents the\nstrongest reading in nine months. In addition, retailers said they expect to see\nanother rise in sales this month.<\/p>\n<\/div>\n\n

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The CBI survey did, however, note an air of\npessimism when it comes to the future business\noutlook. Other data released last month also highlighted growing concerns across the UK household sector, with\nGfK\u2019s long-running Consumer Confidence Index falling to a low of -44 in August. Measures of households\u2019 assessment of\nthe general economic situation and their personal finances both declined last\nmonth, which GfK said reflected \u2018acute concerns as the cost-of-living soars<\/em>.\u2019\n<\/p>\n<\/div>\n\n

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Bank <\/strong>hikes rates<\/strong><\/strong><\/p>\n<\/div>\n\n

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In early August,<\/strong> <\/strong>the <\/strong>largest increase in interest rates <\/strong>for<\/strong> more than a quarter of a century was sanctioned by the Bank of England\n(BoE) as it continues its <\/strong>efforts<\/strong> to <\/strong>contain<\/strong> the <\/strong>rate of inflation<\/strong>.<\/strong><\/p>\n<\/div>\n\n

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At a meeting which concluded on 4 August, the BoE\u2019s nine-member Monetary Policy Committee (MPC) voted by a\nmajority of eight to one to raise Bank Rate by half a percentage point to\n1.75%. This was the sixth increase since\nDecember and took rates to their highest level since late 2008. <\/p>\n<\/div>\n\n

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Minutes to the meeting noted that inflationary pressures had \u2018intensified\nsignificantly\u2019<\/em> since the previous meeting held in mid-June, largely due to the impact of Russia\u2019s\ninvasion of Ukraine on energy prices. A readiness to \u2018act forcefully\u2019<\/em> to indications of more\npersistent inflationary pressures was again reiterated, but the minutes also stressed that the MPC would assess its next move as events unfolded and that policy was \u2018not on a\npre-set path.\u2019<\/em><\/strong><\/p>\n<\/div>\n\n

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When announcing the\nrate decision, the Bank also provided an update of its view on the\nfuture path of inflation, warning that it now expects the\nConsumer Prices Index (CPI) to peak at \u2018just over<\/em> 13%\u2019 <\/em>in the final quarter of this year. It then expects inflation to remain at \u2018very elevated levels\u2019<\/em> throughout\nmuch of next year before returning to its target level of 2% in 2024.<\/p>\n<\/div>\n\n

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Meanwhile,\nthe latest data released by ONS showed that soaring food costs pushed the rate of\ninflation into double digits for the first time since 1982. In the 12 months to\nJuly, the CPI rate jumped to 10.1%, a sharp increase from June\u2019s 9.4% figure and above all forecasts submitted in a Reuters poll of economists. This rise further fuelled expectations of another interest rate hike when the MPC next convenes in mid-September.\n<\/p>\n<\/div>\n\n

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

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Global markets largely closed August in negative territory. <\/strong>Many indices\nmoved into the red at month end <\/strong>as investors digested hawkish comments from <\/strong>Federal Reserve\nChairman Jerome Powell, where he cautioned that the US Fed would act “forcefully”<\/em>\nto control inflation though it would result in “some pain to households\nand businesses.\u201d<\/em><\/strong> <\/strong>Inflation will require continued aggressive global\npolicy, with eurozone inflation data also weighing on market sentiment at month\nend.<\/strong><\/p>\n<\/div>\n\n

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The Fed’s next\nmeeting, where interest rates will be addressed, takes place on 21 September, with\nmarkets having several key economic reports to consider over the next few\nweeks. Looking at US\nmarkets, the Dow closed the month down 4.06% on 31,510.43. The tech-heavy Nasdaq, which tends to be more\nsensitive to Fed policy, closed August on 11,816.20, down 4.64%.<\/p>\n<\/div>\n\n

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In the UK, the FTSE\n100 closed August down 1.88% on 7,284.15, while the midcap-focused FTSE 250\nregistered a loss of 5.46%. The AIM recorded a loss of 4.19% in the month. The Euro Stoxx 50 closed\nthe month down 5.15% on 3,517.25. In Japan, the Nikkei 225 closed\nAugust on 28,091.53, up 1.04%. <\/p>\n<\/div>\n\n

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On the foreign exchanges, sterling closed the month\nat $1.16 against the US dollar. The euro closed at \u20ac1.15 against sterling and\nat $1.00 against the US dollar.<\/p>\n<\/div>\n\n

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Gold is currently trading at around $1,715 a troy ounce, a loss of 2.14% on the month. The hawkish Fed comments indicating more interest rate rises, combined with solid US labour statistics, impacted the gold price. Brent Crude closed the month trading at around $95 a barrel, a drop of around 9.5%. Oil prices traded lower as concerns over global economic growth and renewed restrictions in China weighed.<\/p>\n<\/div>\n\n

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\"\"<\/figure><\/div>\n<\/div>\n\n
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UK economy contracts<\/strong><\/strong><\/p>\n<\/div>\n\n

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Despite economic output<\/strong> <\/strong>falling<\/strong> by less than <\/strong>feared<\/strong> in June, <\/strong>the<\/strong> UK economy still <\/strong>contracted<\/strong> <\/strong>over<\/strong> the second quarter as a whole, <\/strong>with <\/strong>experts typically <\/strong>predicting <\/strong>an increasingly gloomy outlook.<\/strong><\/p>\n<\/div>\n\n

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As expected, the latest growth statistics released by ONS revealed that output\nfell in June, partly due to the month unusually containing two bank holidays to celebrate the Queen\u2019s Platinum\nJubilee. However, a 0.6% contraction was less severe than the consensus 1.3% decline predicted\nby economists in a Reuters poll. June\u2019s figure did though mean the economy\nshrank by 0.1% in the second quarter of this year. <\/p>\n<\/div>\n\n

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Economists are divided over third quarter prospects, with some\npredicting a second successive quarterly contraction \u2013 which would meet the\ntechnical definition of a recession. Although others are forecasting a small rebound in growth between July\nand September. <\/p>\n<\/div>\n\n

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The BoE\u2019s latest assessment predicts the UK\neconomy will next contract in the final quarter and then keep shrinking until\nthe end of 2023. While this would represent a relatively long downturn, the\nBank\u2019s calculations suggest a 2.1% peak-to-trough fall in output, far less than\nthe economic hits from COVID and the 2008-09 global financial crisis.<\/p>\n<\/div>\n\n

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Signs of cooling labour market<\/strong><\/p>\n<\/div>\n\n

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While<\/strong> the latest <\/strong>batch<\/strong> of employment <\/strong>statistics do suggest the overall picture\nin the jobs market remains positive<\/strong>, there are early signs that <\/strong>things<\/strong> may be starting to cool.<\/strong><\/p>\n<\/div>\n\n

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Figures\nreleased last month by ONS showed that the rate of unemployment in the three\nmonths to June was unchanged at 3.8%, close to a half-century low. The data\nalso revealed further strong growth in the number of people in work \u2013 rising by\n160,000 across the April to June period \u2013 although this increase was considerably less than the 256,000 rise analysts had predicted. <\/p>\n<\/div>\n\n

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In terms of\njob vacancies, the data revealed that the total fell by 19,800 in the May to July period. While this still\nleaves the overall number of vacancies close to a record high at 1.274 million, it was the\nfirst reported decline in this figure since mid-2020.<\/p>\n<\/div>\n\n

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Survey evidence released early last month also points to signs of cooling\nin the labour market. Although data from the latest UK Jobs Survey conducted by\nKPMG, and the Recruitment and Employment Confederation, shows the jobs market \u2018remains\nsolid<\/em>,\u2019 it also found that businesses are becoming more cautious, with the\nslowest increases in both permanent staff appointments and temp billings for 17\nmonths.<\/p>\n<\/div>\n\n

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It is\nimportant to take professional advice before making any decision relating to\nyour personal finances. Information within this document is based on our\ncurrent understanding and can be subject to change without notice and the\naccuracy and completeness of the information cannot be guaranteed. It does not\nprovide individual tailored investment advice and is for guidance only. Some\nrules may vary in different parts of the UK. We cannot assume legal liability\nfor any errors or omissions it might contain. Levels and bases of, and reliefs\nfrom, taxation are those currently applying or proposed and are subject to\nchange; their value depends on the individual circumstances of the investor. No\npart of this document may be reproduced in any manner without prior permission.<\/strong><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

Retailers report sales growth Online discounts and the hot summer weather have encouraged an uplift in retail sales, with the latest official statistics showing a rise in July and survey data pointing to further growth in August and September. Data released by the Office for National Statistics (ONS) revealed that total retail sales volumes rose […]<\/p>\n","protected":false},"author":12,"featured_media":7945,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[32,34],"tags":[],"hd_content_source":[116],"_links":{"self":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/7944"}],"collection":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/comments?post=7944"}],"version-history":[{"count":1,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/7944\/revisions"}],"predecessor-version":[{"id":7946,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/7944\/revisions\/7946"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media\/7945"}],"wp:attachment":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media?parent=7944"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/categories?post=7944"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/tags?post=7944"},{"taxonomy":"hd_content_source","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/hd_content_source?post=7944"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}