A flicker of life on the forecourt. Car sales were up by 11% year on year in July. Private sales were up by 20%. Fleet sales were up by 5%. Business sales were down by 20%. Time yet for those purchase orders to be signed before the end of the year.
The recovery is expected to continue. Hybrid sales increased by over 250%. Diesel sales were down by over 25%. Mike Hawes, Chief Executive of the SMMT remains cautious, "showrooms have only just opened nationwide but there is still much uncertainty about the future."
"Much uncertainty about the future perhaps", but the latest IHS Markit / CIPS data points to continued strong recovery in manufacturing, services and construction. Output in the manufacturing sector hit a three year high. The rate of growth in services and construction was the highest for five years. All sectors reported an index reading into the mid 50s, confirming a strong recovery from the Q2 setback.
Data next week is expected to confirm UK GDP fell by 20% in the second quarter. The Bank of England expects the fall for the year as a whole to be 9.5%. The bounce back in 2021 is expected to be around 9%. This is significantly better than the "Old Lady's" earlier prognosis. The V shaped recovery remains in play.
The MPC held base rate at 0.1%. The stay-cation on Planet ZIRP continues. The stock of government debt will be held at £745 billion. The Bank will continue as "buyer of last resort" to meet the extensive borrowing requirement this year. When questioned, the Governor confirmed "Negative Rates" are now in the tool box. The reassuring news, no one is reading the instruction manual, just yet.
Unemployment remains a significant concern, as the furlough scheme unwinds. The Bank expects the number out of work to be 2.5 million by the end of the year as the U-rate increases to 7.5%. The pressure is increasing on the Chancellor, Rishi Sunak, to extend the furlough scheme to the end of the year and into 2021.
It will take more than the "Eat Out to Help Out" campaign, to restore the fortunes of the leisure sector. Hopes for travel and tourism were set back, as quarantine bridges were blocked to Europe and elsewhere. News that "pubs may have to close, if schools are to re-open" just added to the mixed message confusion.
The job losses will be both structural and cyclical. The furlough scheme will have a continued role to play for those sectors, late to recovery in the cycle. For the moment, the Chancellor remains unmoved ... but back bench pressure is increasing ...
The Saturday Economist
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