Rolling live coverage of business, economics and financial markets as retail sales volumes rise by 0.8% in August
- Economists warn that positive retail picture may worsen in winter
- Ryanair cuts October flight plans and attacks Irish government
- FTSE 100 posts declines as industrials drag
The FTSE 100 has fallen by 0.36% so far this morning, with a mixed picture across European stocks.
One reason for the stock market selloff in the UK may be the growing prospect of new coronavirus restrictions across the country. Health secretary Matt Hancock was this morning asked if he was considering a new national lockdown. He said:
I have learned over the last nine months not ever to rule anything out. However, it is not the proposal that’s on the table.
This is a big moment for the country. We are seeing an acceleration in the number of cases. And we are also seeing that the number of people hospitalised with coronavirus is doubling every eight days. We are now starting to see the effects in hospital.
Ryanair, Europe’s largest airline, has cut its flight schedule for October by 20%, as it compared Irish travel restrictions to the North Korean dictatorship.
As customer confidence is damaged by government mismanagement of Covid travel policies, many Ryanair customers are unable to travel for business or urgent family reasons without being subjected to defective 14 day quarantines.
While it is too early yet to make final decisions on our winter schedule (from November to March), if current trends and EU governments’ mismanagement of the return of air travel and normal economic activity continue, then similar capacity cuts may be required across the winter period.
Some news from this morning for stock exchange followers: the London Stock Exchange Group is getting closer to selling the main Italian bourse to French rival Euronext.
Dubbed “Project Botticelli”, the LSE’s sale of the Milan stock exchange is politically sensitive in Rome because of concerns about who could take control of Borsa’s bond platform, which handles trading of Italy’s government debt.
The LSE is selling Borsa as part of regulatory remedies to see through its $27bn purchase of data provider Refinitiv. Offers for Borsa valued the Italian exchange up to €4bn (£3.7bn), sources had said before the LSE board met on Thursday to review the bids on the table.
NatWest Group, formerly known as Royal Bank of Scotland, is reportedly considering winding down its Ulster Bank business in the Republic of Ireland, after it became more challenging to turn around the struggling lender during the pandemic.
Non-store retailing has surged, but apart from food every other part of the sector has suffered a big decline in sales that still has not been made back, even as shops have opened.
Could there be a double dip in retail sales? That would certainly be one potential upshot of rising unemployment.
Here is the picture so far for overall sales volumes:
The August retail figures show that the UK retail industry had a stronger summer than might have been expected, but by most accounts it looks much less appealing as winter approaches.
With the government’s test and trace operation suffering from massive demand and new restrictions on millions of Britons – not to mention an expected wave of redundancies ahead – there is a lot standing in the way of further strength for retailers.
August proved a far better month than most retailers expected, with many market towns and retail parks benefitting from increased footfall as consumers holidayed at home and fears around Covid-19 eased for a short while. However, there remains huge uncertainty for shops, particularly those in city centres.
With the autumn/winter season set to be characterised by uncertainty and increased social restrictions, we can expect to see further changes across the sector as businesses look to reshape their models for a ‘Covid Christmas’. Naturally, there is growing anxiety among those who bank on a successful golden quarter given the impact social distancing could have on this year’s festivities.
There is considerable uncertainty as to just how willing and able consumers will be to spend beyond the third quarter. Indeed, persistent consumer caution is seen as a significant risk that could limit the UK recovery.
The fundamentals for consumers have taken a clear downturn as a result of COVID-19, and they are likely to remain under pressure in the near term at least. Many people have already lost their jobs despite the supportive government measures – as was highlighted by employment falling by 695,000 over April-August […] – while others will be concerned that they may still end up losing their job once the furlough scheme ends in October.
As well as the home improvement sales that the ONS highlighted, clothing sales were also a big contributor to retail sales growth.
Clothes sales rose by 13.5%, a sign that “discretionary spending continued to recover”, said Andrew Wishart, a UK economist at Capital Economics, a consultancy.
Having already exceeded their pre-virus level in July, the further rise in retail sales in August shows the striking rebound of consumer spending after the crisis. That chimes with the Bank of England’s payments data which, as we learnt in the September minutes yesterday, suggests that overall consumer spending may have already made a full recovery.
The strength of retail sales is particularly striking in a month when non-retail spending, particularly on restaurant meals due to the eat out to help out scheme, also picked up.
But spending may yet stutter as the furlough scheme is wound down and unemployment rises, weighing on household incomes and job security. And other parts of the economy, such as investment, are taking much longer to recover. That’s why we think it won’t be until around the start of 2022 that GDP recovers to its pre-virus level. And with virus case numbers accelerating, the risk is it takes longer.
Some more details on the UK’s retail sales increase: it appears that the online sales surge since lockdowns redirected spending away from bricks and mortar shops has slightly abated – but it still looks like it could have a lasting effect.
The ONS said:
Online retail sales fell by 2.5% in August when compared with July, but the strong growth experienced over the pandemic has meant that sales were still 46.8% higher than February’s pre-pandemic levels.
It’s looking like a fairly dreary start on stock market indices across Europe.
The FTSE 100’s declines have been led by industrials such as GKN owner Melrose, jet engine maker Rolls-Royce and weapons maker BAE Systems. Gold and silver miner Polymetal was the worst performer after its biggest shareholder sold its stake.
Good morning, and welcome to our live coverage of business, economics and global financial markets.
UK retail sales grew for the fourth consecutive month since April’s lockdown in August, but the pace of growth slowed markedly.
#UK #retail sales volumes up a healthy 0.8% month-on-month in August; 4th successive gain. Up 2.8% year-on-year & now 4.0% above February level before lockdown impacted. Consumer spending has clearly played leading role in #economy‘s sharp bounce back in third quarter
In August, there was a mixed picture within the different store types as non-store retailing volumes were 38.9% above February, while clothing stores were still 15.9% below February’s pre-pandemic levels.
Retail sales increased by an estimated 0.8% in August.