UK recovery overshadowed by inflation and new Covid variants | Business

Covid variants raise questions over further restrictions easing

The number of daily new confirmed coronavirus infections has risen in the past month, fuelled by the Covid variant first detected in India – B.1.617.2. Prompting questions over the further easing of government restrictions on 21 June, the variant accounts for the majority of new cases in several locations, including Bedford, Blackburn and Wigan. The latest figures to 25 May show 2,493 people tested positive for Covid-19 across the UK, a gradual rise from 1,350 on 1 May. However, the number of patients admitted to hospital and deaths – which lag behind positive test results – has continued a gradual decline. More than 38 million people have had a first shot of a Covid-19 vaccine. More than 23 million have had a second.

Public transport use returns close to pre-pandemic levels

The number of trips taken on public transport has returned close to pre-pandemic levels in the past month, in a sign that more people are starting to leave their homes after lockdown measures were relaxed. According to Apple mobility data – which records requests made to Apple Maps for directions – bus and train journeys are just 5% below levels recorded in January 2020, as more people venture away from home and some office workers resume commuting. Walking and driving is also above pre-pandemic levels.

Stock market gains checked by inflation worries

The FTSE 100 has made modest gains over the past month amid hopes for a stronger economic recovery from Covid-19. However, fears that major central banks will have to raise interest rates to counter rapid growth in inflation have checked the progress of stock markets in recent weeks, denting the value of the blue-chip index and other leading markets around the world. The FTSE 100 has risen by about 50 points in the past month to trade at just over 7,000.

Inflation more than doubles as energy prices rise

UK inflation more than doubled to 1.5% in April amid a sharp rise in oil prices and household gas and electricity bills, the highest level since the start of the Covid-19 pandemic. Although the rate of inflation remains below the Bank of England target of 2%, and most price increases relate to a turnaround from falls last year, the latest figures fuel concern that the cost of living is on a rising trend. Threadneedle Street expects a temporary rise above-target inflation as the economy reopens, although some economists warn high inflation could remain amid heightened government support stoking demand, as well as supply constraints linked to Brexit and higher costs for raw materials.

Business activity grows at the fastest rate since the 1990s

The UK economy recorded its fastest growth in business activity for more than two decades this month as the reopening of hospitality venues indoors led to a sharp rise in consumer spending. The flash IHS Markit/Cips purchasing managers’ index, a closely watched barometer of private sector activity, jumped to 62 in May from 60.7 a month earlier. The 50 mark divides expansion from contraction, and the reading was the highest level since records began in 1998. Business confidence hit an all-time high as concerns about the pandemic continued to fade, while factory orders rose amid a resurgence in global trade. The eurozone economy also continued to grow, albeit at a slower pace. Private sector activity hit a fresh record high in the US as the world’s largest economy stages a rapid recovery. Growth has also accelerated in China.

Unemployment drops as lockdown lifts

UK employers who were getting ready for the easing of lockdown started hiring again in March, according to the latest official figures, driving down the unemployment rate for a third consecutive month. The jobless rate fell to 4.8% in the three months to the end of March from 4.9% in the three months to the end of February, amid broader signs of recovery in the jobs market as the Covid-19 vaccine gives firms confidence to take on more…

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