The UK recovery appeared to stall in July. The ONS monthly estimate of GDP growth for July was up by just 0.1% compared to prior month.
Supply chain problems persist, worker shortages continue. No growth in the service sector; no growth in manufacturing; output down in construction apparently.
Not a great time to put up taxes. Boris Johnson signalled a ten year plan to stay in Number Ten. Abolishing the triple lock and a National Insurance surcharge hardly a measure of intent.
The jobs market is in a precarious position. 1.6 million unemployed, 1.6 million on furlough and 1 million vacancies in the economy. We await with caution, to see how the furlough scheme will unwind. For the moment, analysts expect the increase in unemployment to be around 250,000 by the end of the year. The unemployment rate will increase to 5.4%. The changes in NI rates will not ease the transition. The planned cuts to universal credit will not ease the pain for many.
Our chart of the week updates the analysis of vacancies and furlough numbers by sector. Overall the ratio of furlough to vacancies is 1.6. Accommodation, food, construction and transportation appear to the focus of higher furlough rates. It is difficult to understand why these areas are most cited in terms of recruitment difficulty, when so many remain in stasis. The problems in health and social care are most apparent, with 64,000 on furlough and 161,000 vacancies in the economy at the end of July.
So what Are the Prospects For Growth This Year ...
Despite the disappointment of the July data, the economy remains on track for growth of around 7% this year. The July numbers may have been up by just 0.1% compared to prior month, Compared to prior year, growth was up by 7.5% following a 22% surge in the second quarter. Service sector growth was up by 8%. Manufacturing up by 6% and construction up by almost 9%. Accommodation and food increased by over 50%.
Growth is expected to pick up in August, with continued expansion in tourism and hospitality. The steady return of staff to the office, particularly in London, should boost transport and the service sector. NIESR expects growth of around 7.5% year on year in the third quarter. A steady recovery to the end of the year, will be supported by a further catch up in hospitality and transport.
The government is acting to ease the crisis in Road Haulage. Would be stay-cationers in caravans will no longer have to pass a test to make the trip. The much needed testing resource could lead to an additional 40,000 drivers getting an HGV licence in time for Christmas.
There may be no chicken in Nandos but there is still every chance of a vote for turkey at Christmas ...
The Saturday Economist
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