Knight Frank Daily Update Wednesday 24th June
The economy rebounds, offers for properties surge, and challenges in the mortgage market
2 minutes to read
Good morning,
Need to know
Manufacturers led the largest rebound in economic activity on record in June as the government eased the UK's lockdown.
IHS Markit's Purchasing Managers' Index – where anything above 50 represents growth – rose from 30 in May to 47.6 in June. That exceeded economists’ forecasts of a rise to 41.
The manufacturing sector rose from 40.7 to 50.1. The services PMI rebounded from 29 to 47.
That's the PMI's second consecutive record rise and joins a growing body of evidence showing the economy is beginning to find its feet. UK grocery sales, for example, surged 19% in the four weeks to the 14th of June.
The European economy is also staging a comeback, with the eurozone PMI climbing from 31.9 to 47.5.
Investors will go from “doubting to believing” in a V-shaped economic recovery over the next six months, according to Morgan Stanley strategists. Executives at Volkswagen agree.
The World Trade Organisation said yesterday that sharp declines in global commerce triggered by the spread of the virus are “unlikely to reach the worst-case scenario” forecast earlier in the year. The body, which in April said goods import and export levels could drop by a third this year, now expects a contraction of about 13%.
The slew of economic news came as the Prime Minister further eased the lockdown. The bulk of the country’s hospitality, leisure and tourism industries will be able to restart from the 4th of July, while the two-metre social distancing rule will be replaced by a new “one-metre plus” regime.
The good news across Europe stands in contrast to the global World Health Organization data, which continues to show the virus accelerating, particularly in Latin America. The top infectious disease expert in the US told Congress yesterday that his department was seeing a surge in infections across the country
The property market
Property transactions climbed 16% to 48,450 in May, suggesting activity has now bottomed out, writes Chris Druce. Still, that's about 50% lower than the figure recorded in May last year.
Real-time indicators point to a sustained recovery. Analysis by Tom Bill reveals the post-lockdown surge in property market activity has continued into its sixth week.
The number of offers accepted in the UK in the week ending 20 June was the highest figure on record, and demand indicators have risen to levels that suggest sales and lettings transactions will increase over coming months.
Zoopla now expects house prices to climb 2% during the next three months.
The mortgage market is taking time to return to normality, with some lenders temporarily retreating from higher LTV lending ahead of the wind up of government support schemes this Autumn. Conditions are particularly challenging for the self-employed, with some borrowers with straightforward applications facing delays, Simon Gammon of Knight Frank Finance tells today's Telegraph.
Finally, you can find an overview of key economic and financial metrics, compiled by Will Matthews, here.
If you have any questions, please contact me, or the team.